Understanding the Social Security Earnings Limit

Last updated 6 months ago. Our resources are updated regularly but please keep in mind that links, programs, policies, and contact information do change.

You can receive Social Security retirement or survivor benefits while still employed. However, if you begin receiving benefits before reaching your Full Retirement Age (FRA), specific rules limit how much you can earn before your benefits are temporarily reduced. This guide explains the Social Security earnings limit, how it works, and who it affects.

What is the Social Security Earnings Limit?

The Social Security earnings limit, officially known as the Retirement Earnings Test (RET), applies to beneficiaries who receive retirement or survivor benefits before reaching their Full Retirement Age. If your earnings exceed the annual threshold, the Social Security Administration (SSA) will temporarily withhold some or all of your benefit payments.

This test aligns with Social Security’s original purpose as a social insurance system designed to replace earnings lost due to retirement, disability, or death. For those under FRA, earning above the limit indicates less income loss from retirement, resulting in a temporary benefit reduction.

This earnings limit is temporary. It stops applying completely in the month you reach your Full Retirement Age. From that point forward, your work earnings no longer affect your Social Security retirement or survivor benefits, regardless of how much you earn.

Does the Earnings Limit Apply to You?

Understanding whether the earnings limit applies to your situation is crucial if you plan to work while receiving Social Security benefits.

Who IS Subject to the Earnings Limit

The earnings limit generally applies if you meet all these criteria:

• You receive Social Security retirement benefits (based on your own work record, as a spouse, or as a divorced spouse) OR survivor benefits
• You are younger than your Full Retirement Age (FRA) for some or all of the year
• Your earnings from work exceed the specific annual limit set for the year

When applying the earnings test to individuals receiving survivor benefits, the SSA uses the Full Retirement Age for retirement benefits, even if the FRA for claiming full survivor benefits differs slightly in certain age brackets.

Who IS NOT Subject to the Earnings Limit

The earnings limit does not apply to:

• Individuals at or above Full Retirement Age (FRA): Starting with the month you reach FRA, you can earn any amount without impacting your Social Security retirement or survivor benefits.
• Individuals receiving Social Security Disability Insurance (SSDI): Work activity for SSDI recipients follows different rules, primarily involving Trial Work Periods and Substantial Gainful Activity (SGA) thresholds. These rules determine ongoing eligibility based on work capacity rather than just earnings amounts and are distinct from the retirement earnings test.
• Individuals receiving Supplemental Security Income (SSI): SSI is a needs-based program with its own set of income and resource limits that differ significantly from the retirement earnings test.

The retirement earnings test specifically relates to the concept of “retirement” and replacing work earnings for those claiming benefits before FRA. Disability and SSI rules, by contrast, link to medical eligibility and financial need and have their own frameworks for evaluating work impact.

Finding Your Full Retirement Age (FRA)

Full Retirement Age is the age when you become eligible to receive your full, unreduced retirement benefit, based on your lifetime average indexed monthly earnings.

FRA is crucial for understanding the earnings limit because the limit stops applying permanently beginning in the month you attain this age. Knowing your FRA helps determine if and when the earnings limit affects you.

Your FRA depends solely on your year of birth. Originally set at 65, Congress passed legislation in 1983 to gradually increase the FRA, citing improvements in longevity and health among older Americans. This increase affects individuals born in 1938 and later, with the FRA incrementally rising until it reaches 67 for those born in 1960 or later.

The official SSA Full Retirement Age chart is as follows:

Source: Social Security Administration

A special note applies to individuals born on January 1st: the SSA considers their birth date to be in the previous year for determining FRA.

It’s important to distinguish FRA from the early retirement age. You can start receiving retirement benefits as early as age 62. However, claiming benefits before FRA results in a permanent reduction in your monthly benefit amount. If you claim early benefits and also work, the earnings limit applies in addition to this early retirement reduction. Conversely, delaying benefits past FRA results in an increased monthly benefit, up to age 70.

To easily determine your specific FRA, use the SSA’s Retirement Age Calculator.

The 2025 Earnings Limits

For 2025, the SSA has established two distinct annual earnings limits under the Retirement Earnings Test. The applicable limit depends on whether you will reach your Full Retirement Age during that calendar year.

Under Full Retirement Age for the Entire Year

For individuals younger than their FRA for all 12 months of 2025, the annual earnings limit is $23,400. This equals a monthly average of $1,950.

Reaching Full Retirement Age During the Year

For individuals who will attain their FRA at some point during 2025, a higher annual earnings limit applies: $62,160. This equals a monthly average of $5,180.

Crucially, this higher limit only considers earnings made in the months prior to the month you reach FRA. Any earnings from the month of FRA attainment onward are disregarded for this test.

These two tiers reflect the transition occurring in the year FRA is reached. The lower limit applies to those who claimed benefits well before FRA. The significantly higher limit for the FRA year acknowledges that individuals might still be working substantially leading up to their FRA month, providing a smoother phase-out of the earnings test rules.

These earnings limits typically adjust each year based on changes in the national average wage index, meaning they tend to increase over time.

For context, here are the earnings limits for recent years:

Source: Social Security Administration

How Earnings Above the Limit Affect Your Benefits

When earnings exceed the applicable annual limit, Social Security benefits are not terminated permanently. Instead, the SSA withholds a certain amount from your benefit payments. The amount withheld depends on your age relative to FRA and how much your earnings exceed the limit.

Under Full Retirement Age for the Entire Year

If you are under FRA for all of 2025, the SSA withholds $1 in benefits for every $2 earned above the $23,400 limit.

Example: You’re under FRA all year and receive $800 per month in benefits ($9,600 annually). You work and earn $32,320 in 2025. Your earnings are $8,920 over the $23,400 limit ($32,320 – $23,400 = $8,920). The SSA would withhold $4,460 in benefits ($8,920 ÷ $2 = $4,460). This means you would receive $5,140 in benefits for the year ($9,600 – $4,460 = $5,140). Typically, the SSA accomplishes this by withholding full monthly benefit checks at the beginning of the year until the required amount ($4,460 in this case) is met.

Reaching Full Retirement Age During the Year

If you reach FRA during 2025, the SSA withholds $1 in benefits for every $3 earned above the $62,160 limit, but only counting earnings in the months before the month FRA is attained.

Example: You reach FRA in August 2025 and are entitled to $800 per month ($9,600 annually). You earn $63,000 between January and July 2025 (the months before FRA). Your pre-FRA earnings are $840 over the $62,160 limit ($63,000 – $62,160 = $840). The SSA would withhold $280 in benefits ($840 ÷ $3 = $280). Your benefits from August onwards would be paid in full ($800 per month) regardless of earnings during those months.

The withholding calculation is based only on the excess earnings above the applicable limit. The $1-for-$3 withholding rate used in the year FRA is reached is more lenient than the $1-for-$2 rate for those further from FRA, reflecting the transitional nature of that year and accommodating potentially higher earnings closer to the traditional retirement point.

To estimate how earnings might affect your benefit payments, use the SSA’s online Retirement Earnings Test Calculator.

Which Income Counts Towards the Limit?

It’s essential to know precisely which types of income are considered “earnings” for the purpose of the Social Security earnings limit. The test primarily targets income derived from active work.

Countable Earnings Include:

• Gross wages paid by an employer. This includes salaries, hourly pay, bonuses, commissions, and vacation pay.
• Net earnings from self-employment. This is typically the profit from a business or trade after allowable business expenses are deducted.
• Contributions made by an employee to a pension or retirement plan, but only if that contribution amount is included as part of the employee’s gross wages reported for tax purposes.

Excluded Income (Does NOT Count):

The following types of income are generally not counted towards the earnings limit:

• Income from investments, such as interest, dividends, and capital gains.
• Distributions from pensions, annuities, or retirement accounts like 401(k)s or IRAs.
• Other government benefits, such as Veterans Affairs benefits or state assistance payments.
• Rental income from real estate (unless real estate dealing is the person’s primary trade or business).
• Inheritances, gifts, or insurance proceeds.

The focus on wages and net self-employment earnings reinforces the test’s connection to the concept of replacing lost income from work due to retirement. Passive income sources or distributions from prior savings are not penalized.

The Monthly Earnings Test in Your First Year (“Grace Year”)

A special rule, often called the “monthly earnings test” or “grace year” rule, applies specifically during the first year you receive Social Security retirement or survivor benefits if there is at least one month during that year where you do not work or have earnings below a specific monthly threshold.

This rule is particularly helpful for individuals who retire or significantly reduce their work mid-year. Without it, someone who earned more than the annual limit before retiring could potentially lose all their benefits for the remainder of the year, even if they completely stopped working. The monthly test prevents this by allowing benefits to be paid on a month-by-month basis during this initial transition year.

Under this special rule, a full Social Security benefit check can be paid for any whole month in the first year that the SSA considers you “retired,” irrespective of your total annual earnings. For 2025, the definition of “retired” on a monthly basis for this rule is:

• For those under FRA for the entire year: Monthly earnings are $1,950 or less, AND you did not perform “substantial services” in self-employment during that month.
• For those reaching FRA during the year: In the months before reaching FRA, monthly earnings are $5,180 or less, AND you did not perform “substantial services” in self-employment during that month.

“Substantial services in self-employment” generally means working more than 45 hours per month in your own business. However, working between 15 and 45 hours per month might also be considered substantial if it’s in a highly skilled occupation or involves managing a sizable business.

This monthly earnings test can typically be used only for one year. After the first year of receiving benefits, only the annual earnings limit applies.

Example: You retire at age 62 on October 30, 2025, having already earned $45,000 from January through October. Although your annual earnings greatly exceed the $23,400 limit, if you take a part-time job earning $500 per month starting in November, you can receive your full Social Security checks for November and December under the monthly test, because your earnings in those months are below the $1,950 threshold and you are considered retired for those months. However, if you earned over $1,950 in November, you would not receive a benefit for that month. Starting in 2026, only the annual limit would apply to you.

Benefits Are Recalculated at Full Retirement Age

A common concern about the earnings limit is whether the withheld benefits are lost forever. The answer is no; benefits withheld due to earnings before FRA are not permanently lost.

When you reach your Full Retirement Age, the SSA performs an automatic recalculation of your benefit amount. This recalculation gives you credit for any months in which your benefits were either partially reduced or fully withheld because your earnings exceeded the limit.

The effect of this recalculation is a permanent increase in your monthly Social Security benefit going forward from FRA. Essentially, the SSA adjusts the reduction factor that was initially applied for claiming benefits early. Months during which benefits were withheld are treated as if you had delayed claiming benefits during those months, resulting in a higher base benefit amount at FRA. This transforms the earnings test from purely a withholding mechanism into a process that effectively results in delayed benefit credits for those months where earnings caused benefits to be withheld.

Furthermore, the SSA conducts annual reviews of the earnings records for all working beneficiaries, even those past FRA. If your recent earnings are among your highest 35 years of earnings, the SSA will automatically recalculate your benefit amount to reflect these higher earnings, potentially leading to an increase in your monthly payment.

Your Responsibility: Reporting Earnings to the SSA

The Social Security Administration initially determines whether to withhold benefits based on the earnings estimate you provide when you apply, or based on past earnings records. To ensure the correct amount of benefits is paid and to avoid complications later, it is crucial for beneficiaries under FRA to keep the SSA informed about their work and earnings.

You should report to the SSA if you expect your earnings for the year to be different from the amount you initially estimated. Promptly reporting significant changes—such as starting or stopping a job, or experiencing a notable change in work hours or pay rate—is important. This helps prevent overpayments, which you would be required to pay back, and underpayments, which result in receiving less than the correct amount initially. Accurate and timely reporting ensures the system functions correctly.

Changes in retirement earnings generally cannot be reported through the online my Social Security portal, although that portal can be used for other purposes like checking earnings records or reporting monthly wages for those on disability.

The primary ways to report earnings changes related to the retirement earnings test are:

• By phone: Call the SSA toll-free at 1-800-772-1213 (TTY 1-800-325-0778). Phone lines are typically open weekdays from 8 a.m. to 7 p.m.
• In person or by mail: Contact a local Social Security office. Office locations can be found using the locator tool on the SSA website.

When contacting the SSA, have your Social Security number readily available.

Additionally, be aware that if other family members (like a spouse or child) receive benefits based on your work record, your earnings subject to the limit can also affect those family members’ payments.

Official Social Security Resources

For the most accurate and detailed information, consult these official Social Security Administration resources:

• Main SSA Retirement Page: Comprehensive information about retirement benefits.
• How Work Affects Your Benefits Publication (EN-05-10069): A detailed pamphlet explaining the earnings test.
• Retirement Benefits While Working Page: Focuses specifically on the rules for working while receiving benefits.
• Retirement Earnings Test Exempt Amounts Page: Lists current and historical earnings limits.
• Retirement Age Calculator: Helps determine your Full Retirement Age.
• Retirement Earnings Test Calculator: Estimates how earnings might affect benefit payments.
• General Benefit Calculators Page: Offers a suite of tools for various estimates.
• my Social Security Account: Allows you to view your earnings record, get personalized benefit estimates, and manage certain aspects of your benefits online (though not typically used for reporting retirement earnings changes).
• SSA Contact Information: Provides ways to contact the SSA by phone, mail, or find local offices.

Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.