Social Security benefits are a critical source of income for many retired or disabled individuals in the United States. However, continuing to work while receiving Social Security can impact the amount of benefits one receives—especially for those who begin collecting before reaching full retirement age. Understanding the rules surrounding work and Social Security can help individuals make informed financial decisions and avoid unintended reductions in their monthly payments.
The Basics of Social Security and Work
Social Security is designed to replace a portion of a worker’s income once they retire, become disabled, or in the event of death, provide support to eligible family members. People become eligible to receive retirement benefits as early as age 62. However, full retirement age (FRA) ranges from 66 to 67, depending on the year of birth. If a person claims benefits before reaching their FRA and continues working, their benefits may be temporarily reduced based on how much they earn.
The Earnings Limit
One of the key factors that determine how work affects benefits is the annual earnings limit set by the Social Security Administration (SSA). For 2025, the earnings limit for individuals under full retirement age is $22,320. If a person earns more than this amount while receiving early benefits, the SSA will deduct $1 from their benefits for every $2 earned over the limit.
In the year an individual reaches full retirement age, a higher earnings limit applies. In 2025, this limit is $59,520. During this year, the SSA deducts $1 for every $3 earned above the limit—but only for earnings before the month the person reaches FRA. Once a person reaches full retirement age, there is no reduction in benefits regardless of how much they earn.
Impact on Long-Term Benefits
Though benefits may be reduced temporarily due to excess earnings, they are not lost forever. Once an individual reaches full retirement age, the SSA recalculates the benefit amount, increasing it to account for the months when benefits were withheld. This means that, over time, individuals can recoup some or all of the money withheld.
Moreover, continuing to work can increase one’s benefits over time. Social Security calculates benefits based on the 35 highest-earning years. If a person continues working and earns more in current years than in previous low-earning years, those higher earnings can replace lower ones in the calculation, potentially boosting the monthly benefit amount permanently.
Considerations for Disability Benefits
For those receiving Social Security Disability Insurance (SSDI), working can have different implications. SSDI recipients are allowed to test their ability to work through a Trial Work Period (TWP), during which they can earn above a certain limit without losing benefits. However, if they continue to earn above the Substantial Gainful Activity (SGA) threshold after the TWP ends, benefits may stop.
Conclusion
Working while receiving Social Security benefits is possible and can even be financially beneficial in the long run. However, it’s crucial to understand the rules regarding earnings limits and how they affect monthly payments. Consulting with a financial advisor or contacting the SSA directly can help individuals make the best decisions based on their unique circumstances and long-term financial goals.