Understanding the earnings limits
Working while collecting Social Security can strengthen your retirement, but it also carries risks if you are under full retirement age (67 for most people). In 2025, the earnings limit is $23,400. For every $2 earned above this amount, Social Security deducts $1 from your benefits. These reductions only apply if you start collecting benefits before reaching your full retirement age.
How the limits change at full retirement age
The rules ease in the year you reach full retirement age. The earnings limit rises to $62,160 until the month before your birthday, with benefits reduced by $1 for every $3 above the threshold. Once you reach full retirement age, all limits disappear, allowing you to work without penalty.
What counts as earnings
Social Security considers wages, commissions, bonuses, vacation pay, and self-employment income when calculating reductions. Income from pensions, annuities, investments, veterans benefits, and other retirement sources are not counted.
The monthly earnings rule
If you are under full retirement age for all of 2025, you are considered retired in any month that you earn $1,950 or less. If you reach full retirement age during 2025, the monthly threshold rises to $5,180. Self-employment is measured by hours worked rather than income alone.
Withheld benefits and recalculation
Reductions are not permanent. Once you reach full retirement age, Social Security recalculates your benefits, giving you credit for months when payments were withheld due to excess earnings. This adjustment may increase your future monthly benefit.
New tax break for seniors
Under the One Big, Beautiful Bill Act of 2025, seniors aged 65 and older can claim a temporary $6,000 tax deduction on all income. Eligibility phases out at $75,000 for single filers and $150,000 for joint filers, with no benefit beyond $175,000 and $250,000 respectively. Unless extended, this provision expires at the end of President Trump’s term in 2028.
Strategies to maximize benefits
Retirees can improve outcomes with these steps:
- Delay Social Security until full retirement age or 70 to maximize payouts.
- Time your retirement year so that high-earning months occur before you start claiming benefits.
- Build income streams from sources not counted by Social Security, such as investments or rental properties.
- Track earnings monthly to avoid surpassing limits.
Understanding Social Security’s earnings limits is critical for anyone working past 65. While limits can reduce benefits before full retirement age, they disappear once you reach it. Careful planning, strategic income management, and use of tax breaks can ensure you maximize your retirement income.
