Understanding the Social Security Earnings Test
For those planning to claim Social Security retirement benefits before reaching full retirement age (FRA), the Social Security Earnings Test can be a critical — and sometimes confusing — part of the picture. While claiming early gives you access to monthly income, earning too much from work may reduce your benefits temporarily. However, these withheld benefits are not lost — they’re factored back into your future benefit amount.
If you’re after your Full Retirement Age, earn all you want. It won’t affect your benefit amount. Taxes – yes. Benefits – no.
Here’s what you need to know.
What Is the Social Security Earnings Test?
The Social Security Earnings Test applies to people who:
- Claim retirement benefits before reaching full retirement age (FRA), and
- Continue working and earning income from employment or self-employment.
If your earnings exceed certain limits, the Social Security Administration (SSA) will withhold a portion of your benefits. This is not a tax — it’s a withholding that gets added back into your benefit formula later on.
Included Earnings: In this context, earnings refers to income from wages or self-employment that the claimant earns. Other income sources such as pensions, investment income, or spousal income is not included.
There are three distinct phases of the earnings test:
- Any Year before the year you reach your Full Retirement Age: In this phase, your benefit is reduced by $2 for every $1 over the limit.
- In the year of your Full Retirement Age, any month before your FRA month: In this phase, your benefit is reduced by $1 for every $3 over the limit.
- After your Full Retirement Age: In this phase, there is not reduction!
Any earnings in 2024 and earning will reduce your Social Security benefits by$1 for every $2 over the limit.
Any earnings in January 2025 to April 2024 will reduce your Social Security benefit by $1 for every $3 over the limit.
And, there is no earnings reduction from May 2025 onward.
The income limits change annually based on inflation. Here are recent examples:
| | 2024 | 2025 |
|---|---|---|
| Under FRA *$1 W/H for Every $2 Over | $22,320/yr or $1,860/mo | $23,400/yr or $1,950/mo |
| Year reaching FRA *$1 W/H for Every $3 Over | $59,520/yr or $4,960/mo | $62,160/yr or $5,180/mo |
Example of Earnings Test Calculation
Let’s say you’re 63 years old in 2025 and decide to claim Social Security in January. You also plan to earn $40,000 in wages that year.
- Earnings Limit (2025): $22,320
- Excess Earnings: $40,000 – $22,320 = $17,680
- Withholding: $1 for every $2 over the limit
- Total Withheld: $17,680 ÷ 2 = $8,840
How Earnings Test Results are Withheld
The SSA doesn’t reduce your monthly check proportionally – total withheld divided by 12 – as most people would expect. Instead, they withhold entire months of benefits until you’ve reached the total withholding. At the end of these months, your benefit will resume at its full level.
They do this by taking the withholding and dividing your full benefit into it. Continuing the previous example, if your withholding is $8,840 and your monthly benefit is $1,200 or $14,400 per year, they will divide $8,840 by $1,200 to get the number of months withheld.
Months Withheld = $8,840 / $1,200 = 7.36 months.
They do however round down to the nearest whole month so they will use 7 months.
What this means is SSA will not pay you a benefit for January through July but then pay you the full $1,200 benefit from August to December.
The earnings test can also affect:
- Spousal Benefits: If your own benefits are withheld due to earnings, any benefits a spouse or dependent is receiving on your record may also be withheld.
- Survivor and Disability Benefits: Different rules apply and the earnings test might not impact them the same way.
- Child-in-Care Benefits: If you’re receiving benefits for a child and are subject to the earnings test, those benefits may be withheld as well.
What Happens to Withheld Benefits
While your benefit is reduced, the good news is that the money is not lost.
Once you reach your full retirement age, the SSA will recalculate your benefit to account for any months your benefit was withheld.
For every month a benefit was withheld, your early claiming penalty is reduced — essentially as if you had delayed claiming those months. This results in a permanent increase in your monthly benefit starting the year after you reach FRA.
For example, if you claimed benefits 36 months early but had 12 months of benefits withheld due to the earnings test, your benefit would eventually be recalculated as though you had claimed only 24 months early — resulting in a higher monthly benefit going forward.
Summary
The Social Security Earnings Test isn’t a penalty — it’s a timing mechanism. If you continue working after claiming early, your benefits may be withheld for a while, but they come back to you in the form of higher payments later. Understanding the rules allows you to make informed decisions about when to claim benefits and how to coordinate your income sources for maximum efficiency.