You Can Work and Get Social Security. But It Might Cost You

Working and getting a Social Security retirement benefit every month sounds like a great idea, right?

Maybe not. If you apply for Social Security before reaching full retirement age and continue working or file and then go back to work, you could temporarily lose some of your monthly benefit depending on how much you earn.

If you do lose some of your benefit, you will get the money back, but not in a lump sum. You’ll get it back little by little every month after you reach full retirement age.

If you’re 62 this year — or for anyone born in 1960 and later — your full retirement age is 67. And if you choose to apply for Social Security before your full retirement age:

• Your retirement benefit will be reduced by as much as 30 percent, permanently.
• Your work income will be put to the test — specifically, the Social Security retirement earnings test

Why the government has an earnings test

The earnings test is a legacy of Social Security’s initial goal to provide a guaranteed income for older adults who have retired from work. If you can still work, you’re not really retired, the thinking goes.

The test is less stringent than in the past. It used to apply until age 70 but now ends at full retirement age.

If you’re younger than full retirement age and your earnings from work exceed $23,400 in 2025, the Social Security Administration (SSA) will withhold $1 from your benefit payment for every $2 in earnings above the limit.

Exceed the level by enough, and your entire benefit could be withheld.

If you work for someone else, your gross wages count toward the earnings test. If you’re self-employed, your net earnings will be used.

Earnings include bonuses, commissions and vacation pay, SSA says. What doesn’t count: annuities, interest, investment income, pensions, and government or military retirement benefits.

Doing the math on your money is important

Here’s the way the earnings test works: Let’s say you turned 62 in December 2024. You’re earning the U.S. median income — $1,196 a week, or $62,192 a year — but you’re considering starting Social Security to bring in a little more.

Let’s also say you would qualify for the average Social Security retirement benefit — $2,005 a month as of June 2025 — if you had waited to collect until age 67, your full retirement age. If you take the 30 percent cut to start collecting in January, your benefit will be $1,403.50 a month, $16,842 a year.

Think twice about filing. You’ve already flunked the earnings test.

Your income ($62,192) exceeds the annual limit ($23,400) by $38,792. Social Security would reduce your payments for the year by half that, $19,396, wiping out your anticipated benefit of $16,842.

What if you scale back to a part-time job that will pay you $40,000 in 2025? You’re still over the cap, but not by enough to erase your benefit. The reduction for the year would be $8,300, or half the difference between your income and the earnings limit.

If you plan to keep working or to go back to work, do your homework on the earnings test. You can have Social Security crunch the numbers. Just enter your expected earnings and benefit information into the agency’s Retirement Earnings Test Calculator.

Earnings test changes the year you reach full retirement

The previous examples are for the basic earnings test of $23,400 a year. That’s the cap for reaching full retirement age in 2026 or later.

If you reach full retirement age this year, you’ll face a less restrictive limit of $62,160. Social Security holds back $1 in benefits for every $3 in excess earnings until the month of your birthday.

At that point, the test goes away, and the SSA starts paying you back.

You won’t see a refund check, like with income taxes

Don’t expect the money taken out of your monthly check to come to you in a lump sum when you reach full retirement age.

It will be returned to you gradually as you get older because the SSA recalculates your retirement benefit to credit you for the withheld money.

For instance, if you continue to make the median income for the next five years until your full retirement age at 67 and continue to flunk the retirement earnings test, Social Security officials will give you credit for all five additional years of work and say you retired at age 67 even though you filed at 62. That later work could be among your 35 highest earning years, potentially increasing your monthly Social Security benefit beyond what you expected earlier.

Even if you had years when only some of your Social Security was withheld, your benefit will be reset to a different filing date closer to your full retirement age. That means a higher monthly retirement benefit.

About the author

Andy Markowitz is an AARP senior writer and editor covering Social Security and retirement. He is a former editor of the Prague Post and Baltimore City Paper.

About the reviewer

Jammie Lyell, the Social Security program manager for AARP’s office of community, state and national affairs, previously worked at the Social Security Administration as a legal administrative specialist and technical expert. He earned a master’s degree in organizational psychology from Walden University.

Next in series

Taxes on Social Security Are Based on Your Income

Related

• Biggest Social Security changes for 2025
• 3 reasons to claim Social Security early (and 3 reasons to wait until 70)
• 7 things to know about working while getting Social Security