Social Security’s “Earnings Test”

These days, working throughout one’s sixties and into and even beyond one’s seventies is very common. Recognizing that reality – and considering another which shows that most people today claim Social Security benefits in their early sixties – it’s not surprising that many have questions about working (and earning) while also collecting Social Security benefits. So, let’s take the mystery out of Social Security’s “earnings test” which affects everyone who works while collecting early benefits before their SS full retirement age.

Earnings Test Fundamentals

First, a couple of fundamentals:

  • The earnings test does not apply after full retirement age (FRA) is reached. Starting at the month you reach FRA, earnings will no longer affect your monthly Social Security benefit, regardless of how much you earn.
  • Only earnings from working count towards the limits set by the earnings test. “Passive income” such as pensions, investment returns, IRA or 401(k) withdrawals, interest income, etc., do not count toward the earnings limit.

The earnings test applies to everyone collecting Social Security retirement, spousal, or survivor benefits before they have reached their full retirement age (FRA). Each year, Social Security sets a limit for how much recipients of early benefits may earn before those benefits are reduced. The limit increases each year based upon changes to the National Average Wage Index, but for 2025 the base annual earnings limit is $23,400. If the base annual limit is exceeded, Social Security will assess a penalty of $1 for every $2 earned over the limit, and that penalty will affect your benefits. Here’s an example of how the penalty is computed:

How it works

If you are collecting early benefits and earn $30,000 during 2025, you earned $6,600 more than the annual earnings limit. You will owe $3,300 (half of your earnings over the limit) which you will need to repay.

Exceeding the annual limit will result in Social Security issuing an Overpayment Notice and offering you two primary options[1] to repay – you can either pay what is owed in one lump sum, or they will withhold your benefits until the overpayment is fully recovered. Benefits lost in this manner, however, are not a true “penalty” because they are not fully lost forever. Here’s why:

When you reach your full retirement age, Social Security will determine how many months you forfeited benefits because of the earnings limit. Your benefit-start-date will be adjusted to a date that number of months later than the date your benefits originally started, increasing your FRA benefit amount accordingly. Thus, over time, you can recover some or all the benefits withheld because you exceeded the earnings limit prior to your full retirement age.

Are there other rules?

As with so many of Social Security’s regulations, there are several related special rules which may apply:

  • A special “first year rule” applies when someone starts early benefits mid-year. In this case, earnings before benefits start do not count toward the earnings limit and, instead, a monthly limit (1/12th of the annual limit) is used for the remaining months of that calendar year. However, the penalty for exceeding the monthly limit is different – exceeding the monthly limit means that no benefits will be paid for that month. Social Security will use either the monthly limit or the annual limit for that first year, whichever results in the lowest penalty. After that first partial year, only the annual earnings limit will apply.
  • During the year you reach your full retirement age, the earnings limit and the penalty computation are different. During that year, and for earnings before your FRA month, the limit is about 2.5 times higher ($62,160 for those attaining FRA in 2023) and the penalty for exceeding the limit is less ($1 for every $3 over the limit).
  • If Social Security retirement benefits are withheld, any dependents receiving benefits from that primary person’s record will not get benefits for the months the primary person’s retirement benefits are withheld.

Social Security prefers and requests that they be notified whenever you know you will exceed the earnings limit while collecting early benefits. In this way, they can withhold benefits in advance as needed and avoid a later Overpayment Notice. If you do not notify them in advance that you will exceed the earnings limit, they will catch up and issue the Overpayment Notice in the following year when you file your income taxes.

How to Get Help

The earnings test is a very important consideration when deciding when to claim Social Security. Those with high earnings may even be disqualified from receiving early Social Security benefits because what they owe due to the earnings test will result in a penalty which entirely offsets the early benefit they are eligible for. The AMAC Foundation’s Social Security Advisory Service provides free guidance on all matters related to Social Security, including the earnings test. Contact us at SSAdvisor@amacfoundation.org, or call 1.888.750.2622 during normal EST business hours.

[1] If both of these repayment options create a severe financial hardship, Social Security may work with you to develop a less punitive repayment plan.

Also, if you’re unsure about how these basics apply to you, or if you have any questions about your individual situation under Social Security, note that the AMAC Foundation provides a free-to-the-public advisory service to help Americans navigate the complexities of this program. All questions are answered quickly, at no charge.  Learn more about it here…

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our