Social Security provides a crucial safety net for millions of retirees, but for many, the benefits alone aren’t enough to meet basic needs. According to a 2024 survey by the Nationwide Retirement Institute, 55% of U.S. adults feel their Social Security checks fall short of covering essential expenses. Similarly, a T. Rowe Price study shows 20% of retirees are working part- or full-time, often due to financial necessity.
While working during retirement can offer financial stability, it may also reduce your Social Security benefits through the retirement earnings test. As 2025 approaches, here’s what you need to know about the updated income limits and how they might affect your benefits.
Table of Contents
Earnings
The retirement earnings test applies if you meet three conditions:
- You’re collecting Social Security retirement, spousal, or survivors’ benefits.
- You’re under your full retirement age (FRA).
- You’re earning income, such as wages from employment.
If your earnings exceed a specific threshold, a portion of your benefits will be temporarily withheld. However, the good news for 2025 is that these income thresholds are increasing, allowing you to earn more before reductions apply.
| Earnings Test Category | 2024 Income Limit | 2025 Income Limit | Reduction |
|---|---|---|---|
| Under FRA | $22,320 per year | $23,400 per year | $1 for every $2 over the limit |
| Reaching FRA in 2025 (pre-FRA earnings) | $59,520 per year | $62,160 per year | $1 for every $3 over the limit |
Example
Imagine you’re 66 years old, earning $60,000 in 2025, and reaching your FRA later in the year. Under the 2024 limits, your income exceeds the $59,520 threshold, resulting in a temporary benefit reduction. But with the increased 2025 limit of $62,160, your earnings no longer trigger a reduction—leaving your benefits intact.
Impact
The Social Security Administration (SSA) recalculates your benefits when you reach FRA, crediting any amounts withheld due to the earnings test. This recalculation increases your monthly payments for the rest of your life.
While withholding may feel like a loss in the short term, it can boost your long-term financial stability by providing larger benefits after you reach FRA. In other words, the system ensures that withheld benefits are not lost—they’re simply deferred.
Maximizing
If you’re nearing retirement or already collecting Social Security, staying informed about earnings test limits is critical. Planning your work and income can help you avoid unexpected reductions while leveraging opportunities to maximize your benefits.
FAQs
What is the retirement earnings test?
An income limit that reduces Social Security benefits if exceeded.
What are the 2025 earnings test limits?
$23,400 for under FRA; $62,160 for reaching FRA.
Do withheld benefits disappear?
No, they are credited back after you reach FRA.
How much can I lose under the earnings test?
$1 for every $2 or $3 over the limit, depending on FRA.
Should I work while collecting benefits?
It depends on your financial needs and long-term goals.
