How to occupy your free time is one of the largest decisions you’ll face during retirement. Perhaps learning an instrument, playing a sport, volunteering, or traveling will fill up your calendar; and if you’re like many retirees, working part time is also an option (or perhaps even a necessity).

While working during retirement is often a smart way to pass the time and can provide you with a sense of purpose and structure—while of course bringing in additional income—it’s important to know how collecting a paycheck can impact your Social Security benefits.

Can I work and collect Social Security benefits?

Yes, this is most certainly possible. In fact, The Bureau of Labor Statistics projects that by 2033, 30% of U.S. adults aged 65 to 74 and 10% of those aged 75+ will still be part of the workforce.

There’s a limit on how much you can earn to still receive full benefits, however, which we’ll discuss in the following sections.

Know your full retirement age (FRA)

While you can begin receiving Social Security benefits at age 62, you aren’t entitled to 100% of your benefits until you reach your full retirement age (FRA).

This number is based on your birth year. Born after 1960? Your FRA is 67 (currently). Familiarizing yourself with your own specific number can shed light on how working during retirement will impact your Social Security benefits.

How much money can you earn while collecting Social Security?

If you work before reaching your FRA, the dollar amount of your monthly Social Security check is sometimes temporarily reduced if you earn more than the yearly limit set by the Social Security Administration (SSA). In 2025, for example, the SSA will deduct $1 from Social Security benefit payments for every $2 earned above the annual earnings limit if you fall below your FRA for the entire year (with the current limit of $23,400 in this scenario). If you earn $25,000 annually, therefore, Social Security will withhold $800 of your benefits as you’re $1,600 above the limit.

If you work during the year you’ll reach your FRA, meanwhile, Social Security will deduct $1 for every $3 you earn above the limit. The 2025 limit is $62,160 in this scenario and only includes earnings before the month you reach your FRA, meaning $2,613 is withheld if you earn $70,000 from January through October and don’t hit this age until November (as you’re $7,840 over the limit).

If you’re still working when you reach full retirement age, your income no longer reduces your benefits no matter how much you earn.

How the Social Security Administration withholds benefits to recoup penalties

Withholding means the Social Security Administration will stop sending you a check until they recoup any amount owed. For example, if you owe $3,500 and your monthly Social Security check is $1,000, you won’t receive a check for 4 months—with the balance owed to you ($500) refunded at a later date.

It’s also important to note that you won’t actually lose your benefits in this case: they’re just technically deferred and credited by adjusting your monthly benefit amount beginning the month you reach your FRA. For example, if you claim Social Security at age 62 and the SSA withholds $5,000 because you earned $33,400 ($10,000 over the earnings limit), this results in 4.17 months of benefits lost if your monthly benefit is $1,200. The SSA would round up to 5 months in this case (they don’t process fractional payments) and then increase your benefit when you hit your FRA.

Social Security makes these adjustments automatically based on W-2s and tax returns, but you can also report your estimated income at the beginning of the year and then reconcile at the end to minimize (or even eliminate) the number of checks withheld.

Income that counts when determining your Social Security earnings limit

Only earnings from work count towards your Social Security earnings limit. If you work for someone else (meaning you’re not self-employed), your wages count towards Social Security limits as soon as you earn them—rather than when they’re paid out. For example, if you earn pay for accumulated sick or vacation days or are awarded bonuses in 2025 paid out in 2026, these all count against your 2025 earnings limit. Contributions to a pension or other retirement plan are likewise also counted when the contribution amount is included in gross wages.

For self-employed individuals, meanwhile, only net earnings are included against the limit and generally counted when you receive that income—rather than when you earn it.

The special earnings limit rule

Under a special Social Security Administration rule—which applies for one year, typically during the first year of retirement—you can receive a full Social Security check for any whole month you’re retired (regardless of yearly earnings). This rule was created so as to not penalize people who retire mid-year (or later in the year) and have already earned more than the earnings limit prior to retirement.

You must meet a few qualifications to take advantage of this rule. First and foremost, Social Security must consider you “retired”: meaning you’ve passed their monthly earnings test by engaging in only limited or no paid work. More specifically, your monthly retirement earnings must not exceed $1,950 if you haven’t yet reached your FRA. You also cannot perform substantial self-employment services, meaning devoting more than 45 hours per month to your business (or 15 to 45 hours per month to a business in a “highly skilled” occupation).

To illustrate, let’s assume you plan on retiring at age 62 and collecting Social Security beginning in November 2025. In this case, you’d earn about $50,000 (significantly more than the earnings limit) from January through October of that same year. Provided your monthly income doesn’t exceed $1,950 for the remainder of 2025, you’re entitled to enjoy full Social Security benefits that November and December.

The special rule also applies to those who retire and reach full retirement age in the same year, which works in a similar manner—the only difference being you can earn a higher monthly income of up to $5,180 (rather than $1,950) to be considered “retired.”

Your Social Security benefits can increase if you continue to work

Each year, the Social Security Administration reviews files of all recipients who are working. If the latest year of earnings represents one of your highest earning years, they’ll reconfigure your benefit for the better (if applicable): an automatic process with benefits paid in December the following year.

In sum: how working during retirement impacts your Social Security benefits

If you plan on working and collecting Social Security benefits prior to reaching your full retirement age, it’s helpful to know how those earnings can impact your benefits. This is precisely where proper planning comes into play—ideally with a financial advisor—so you can determine how to best optimize your Social Security benefits based on your own specific situation.

Still have questions about working and Social Security? Schedule a FREE discovery call with one of our CFP® professionals to get them answered.

FAQs

Yes! If the Social Security Administration withholds some of your benefits because you earned too much during early retirement, a recalculation will occur when you reach your full retirement age (FRA) to incorporate them (potentially giving you a higher benefit later on).
No, capital gains aren’t included in the Social Security earnings limit income calculation.
No, these three items aren’t considered income when determining the Social Security earnings limit.
No, these aren’t counted as income when determining the Social Security earnings limit.
No, these benefits (e.g., unemployment or disability benefits) don’t count as income when determining the earnings limit.
Contributions made to a pension or retirement plan are considered income if they’re included in gross wages.

Working and Collecting Social Security: What You Need to Know