The Earnings Limit Changes When You Reach Full Retirement Age
If you are under full retirement age for the entire year, Social Security reduces your benefit by $1 for every $2 you earn above the annual limit. For 2024, that limit is $23,400. In the year you reach full retirement age, the reduction is $1 for every $3 you earn above $62,400, but only for earnings before the month you turn full retirement age. Once you reach full retirement age, there is no earnings limit at all — you can make as much as you want.
The key word is earnings: Social Security counts only wages from work and net income from self-employment. It does not count pensions, investment income, rental income, or withdrawals from retirement accounts. If you are unsure whether a specific income counts, Social Security's website has a detailed list, or you can call 1-800-772-1213 to ask.
These limits and dollar amounts change each year. Social Security announces the new figures in October for the following year, so check the official website or call before you plan your work schedule.
Key Takeaways
- If you have not reached full retirement age, Social Security reduces your benefit by $1 for every $2 you earn above $23,400 per year (2024 figure).
- Only wages and self-employment income count toward the limit — pensions, investments, and retirement account withdrawals do not.
- Once you reach your full retirement age, the earnings limit disappears and you can work without any reduction to your benefit.
- The annual earnings limit increases each year, so the 2024 figure will not explore in 2025.
- If you exceed the limit, Social Security withholds benefits automatically — you do not have to repay the money yourself.
How Social Security Calculates the Reduction
Social Security does not reduce your benefit dollar-for-dollar. Instead, it uses a formula based on how much you earn over the limit. If you earn $25,400 in a year and the limit is $23,400, you are $2,000 over. Social Security withholds $1,000 of your benefits (half of $2,000). If your monthly benefit is $1,500, you would receive $1,000 that month instead, or the withholding might be spread across several months.
You do not have to repay the withheld amount out of pocket. Social Security straightforward holds back part of your monthly check. Once you reach full retirement age, Social Security recalculates your benefit to account for the months when benefits were withheld, so you do not lose that money permanently — you receive it later as a higher monthly payment.
Self-Employment Income and the Earnings Test
If you are self-employed, Social Security counts your net profit (income minus business expenses) toward the earnings limit. You report this on your tax return, and Social Security uses that same figure. The earnings test applies whether you work full-time, part-time, or own a business.
There is one exception: if you are self-employed and did not work substantially in your business during the month, Social Security may not count that month's income toward the limit. "Substantially" usually means you worked more than 15 hours per week in the business. This is rare and applies mainly to people who own a business but do not actively run it. If this situation applies to you, contact Social Security directly — the rules are complex and depend on the type of business.
What Happens If You Earn More Than the Limit
Social Security does not penalize you for earning over the limit. It straightforward reduces your benefit that year using the formula above. You keep the money you earned from work. Many people find it makes sense to work more and receive a smaller benefit check if the total income is higher.
You do not have to report your earnings to Social Security yourself. Your employer reports your wages to the IRS, and Social Security gets that information automatically. If you are self-employed, you report your income on your tax return, and Social Security accesses it from there. You should still report significant changes in your work status to Social Security — for example, if you stop working or change jobs — so they can adjust your benefit correctly.
Earnings Limits in the Year You Reach Full Retirement Age
The year you turn full retirement age has a different rule. From January through the month before you turn full retirement age, Social Security reduces your benefit by $1 for every $3 you earn above $62,400 (2024 figure). Once you reach full retirement age, even if it is mid-year, the limit disappears for the rest of that year and all future years.
This higher threshold in the year you reach full retirement age gives you a window to earn more without as much reduction. If you plan to work heavily in the year you turn full retirement age, this is worth factoring into your decision about when to start benefits.
Planning Your Work and Benefits
If you are thinking about working while receiving Social Security, consider the total picture: your monthly benefit, the earnings limit, how much you plan to earn, and when you will reach full retirement age. Some people delay starting benefits until full retirement age specifically so they can work without any reduction. Others start benefits early and accept the earnings reduction because the total income is still higher.
Social Security has a Retirement Earnings Test Calculator on its website that lets you estimate how much your benefit will be reduced based on your expected earnings. This tool can help you decide whether to work, how much to work, or whether to delay starting benefits. You can also contact Social Security at 1-800-772-1213 to discuss your specific situation.
Frequently Asked Questions
Does my pension count toward the earnings limit?
No. Social Security counts only wages from employment and net self-employment income. Pensions, annuities, investment income, rental income, and withdrawals from retirement accounts like IRAs or 401(k)s do not count. Only money you earn from working counts.
What if I work part of the year and then stop?
Social Security counts only the earnings for the months you actually worked. If you earn $30,000 in the first six months and then stop working, Social Security applies the earnings test to that $30,000. The months you did not work do not count against you.
Can I work and receive benefits if I have not reached full retirement age yet?
Yes, but your benefit will be reduced if you earn more than the annual limit. For 2024, that limit is $23,400. If you earn more, Social Security withholds $1 of your benefit for every $2 you earn above the limit. Once you reach full retirement age, you can work without any reduction.
Do I need to tell Social Security if I start a new job?
You do not have to report it yourself — your employer reports your wages to the IRS, and Social Security receives that information automatically. However, if your work situation changes significantly (you stop working, retire, or change jobs), it is a good idea to contact Social Security so they can make sure your benefit is calculated correctly.
Will I lose the money that was withheld from my benefits?
No. Once you reach full retirement age, Social Security recalculates your benefit to account for the months when benefits were withheld. Your monthly payment increases to make up for what was held back, so you receive that money eventually as a higher benefit.