If you’re planning to collect Social Security benefits in 2025 while continuing to work, understanding how the earnings test works is essential. This test determines whether some of your benefits will be withheld if you earn above specific income limits before reaching your full retirement age (FRA). Here’s a simplified guide to how it works and what it means for your finances.
What Is the Earnings Test?
The Social Security earnings test applies to people who begin receiving benefits before reaching FRA and who continue to work. Depending on how much you earn, the Social Security Administration (SSA) may temporarily withhold part of your benefits.
There are two key income thresholds:
- For those under FRA all year, benefits are reduced if earnings exceed a lower annual limit.
- For those reaching FRA in 2025, a higher limit applies, but only for earnings before the month you hit FRA.
How Much Can You Earn Without Losing Benefits?
While 2025 limits have not yet been finalized, they are expected to be slightly higher than the 2024 thresholds, which were:
- Under FRA all year: $21,240 annually.
- Reaching FRA in 2025: $56,520 annually (for earnings before FRA month).
If your income is above these limits, the SSA will withhold some benefits.
How Much Will Be Withheld?
- If you’re under FRA all year: For every $2 you earn above the limit, $1 of your benefits will be withheld.
- If you reach FRA in 2025: For every $3 earned above the higher limit, $1 of benefits will be withheld—but only for the months before FRA.
Let’s break it down with an example:
If you are 62 in 2025 and earn $30,000 while collecting Social Security, here’s how it works:
- Subtract the limit from your earnings:
$30,000 – $21,240 = $8,760 in excess earnings. - Divide excess earnings by 2 (since $1 is withheld for every $2):
$8,760 ÷ 2 = $4,380 withheld.
In this case, $4,380 of your benefits would be withheld for the year.
What Happens to Withheld Benefits?
Don’t worry—you won’t lose those withheld benefits forever. When you reach FRA, your monthly payment will be recalculated to include the months your benefits were reduced, ensuring you eventually get back the withheld amount over time.
No Limits After FRA
Once you hit FRA, the earnings test no longer applies. You can earn as much as you like without affecting your Social Security payments.
Planning Ahead
The SSA offers tools, like the Retirement Earnings Test Calculator, to help estimate how much your benefits might be reduced. By planning your income and the timing of your benefits, you can make the most of your Social Security payments.
