Many retirees or soon‑to‑be retirees wonder: can you work and collect Social Security benefits at the same time? The short answer is yes, but the rules are complex. Whether you receive Social Security retirement benefits, military retirement benefits, disability benefits, or other pension or retirement plan income, working while you collect benefits can affect your monthly benefit, your annual earnings limit, your Social Security benefit adjustments, and your broader tax and income strategy.
At Towerpoint Wealth, we advocate for informed planning. Whether your employment status remains active or you transition to part‑time work, understanding how the Social Security Administration handles the earnings limit, withheld benefits, and full retirement age is essential. In this post we will examine:
- The rules governing working while collecting social security benefits
- How the annual limit and earnings limit apply in 2025
- Interplay of net earnings, gross wages, excess earnings, and passive income
- How your retirement age based decisions, full retirement age, and delayed retirement credits come into play
- Planning strategies for a higher benefit, full social security benefits, and integrating Social Security into your income plan
What Are Social Security Retirement Benefits, and Who Qualifies?
To collect benefits, you generally must satisfy the Social Security retirement benefits eligibility requirements. That includes earning 40 work credits (roughly 10 years of employment) and reaching at least age 62 to claim social security. Your benefit amount is based on your 35 highest years of income, indexed for inflation, and depends on when you begin collecting relative to your full retirement age.
You can begin collecting social security as early as age 62, but you will receive a reduced retirement benefit compared to what you’d get at full retirement age or later. If you wait beyond full retirement age, you accrue delayed retirement credits, which increase your monthly payments.
Your decision of when to start collecting benefits, and whether to continue working while you receive them, requires balancing short‑term income needs, taxes, and long‑term lifetime income.
The Earnings Test: When Working Affects Social Security Benefits
One of the most important constraints when you work and collect Social Security benefits is the earnings test (sometimes called the retirement earnings test). This is how the Social Security Administration determines whether your retirement benefits are reduced because of your net earnings (from wages or self‑employment) above certain thresholds.
2025 Annual Earnings Limits and How They Work
In 2025, the annual earnings limit for those who have not yet reached full retirement age is $23,400. If your gross wages or net self employed income exceed that, your benefit payments are reduced at a rate of $1 withheld for every $2 you earn above the limit.
If you reach full retirement age sometime in 2025, a different limit applies for earnings prior to the month you reach your full retirement age. That limit is $62,160 in 2025, and the reduction is $1 for every $3 you earn above that threshold (but only up until your full retirement month). Once you pass your full retirement age, there is no earnings limit and your benefits will not be reduced no matter how much you earn.
These rules mean that if you are working before reaching full retirement age and collecting social security benefits, you must monitor your yearly earnings carefully to avoid excess earnings penalties.
How Withheld Benefits Are Reconciled
When benefits are withheld because of the earnings limit, they are not lost forever. Once you reach full retirement age, the Social Security Administration recalculates your benefit to factor in months when some benefits were withheld, increasing your monthly benefit amount accordingly. In other words, withheld benefits result in a higher later benefit, restoring some of what was withheld.
However that adjustment does not always fully compensate depending on how early you claimed, how many months were withheld, your remaining life expectancy, and other income. Thus, delaying Social Security might still yield a higher benefit overall.
What Counts as Earnings?
Only earned income counts toward the earnings limit, that is wages, salary, self‑employed business income (after expenses), commissions, bonuses, and vacation pay (if counted as wages). Investment income, capital gains, pension or retirement plan distributions, military retirement benefits, disability benefits, and most other government benefits are not counted in the earnings test. For self employed individuals, a “special rule” may apply: you may avoid reduction if in months you did not perform substantial services or your earnings were below a threshold.
Scenarios: How the Rules Play Out in Practice
Let’s look at a few illustrative scenarios that reflect real possibilities for someone wanting to work and collect social security benefits.
Scenario 1: You Are Below Full Retirement Age and Working
Suppose Jane is 64 in 2025, receiving Social Security retirement benefits. She still works part time at a consulting firm and earns $40,000 in 2025. Because she is under full retirement age, the earnings limit is $23,400. She is over the limit by $16,600. The Social Security Administration would withhold $1 for every $2 above the threshold, so they would withhold $8,300 in benefits. After she reaches full retirement age, her monthly benefit will be recalculated to credit for some of those withheld months.
Scenario 2: You Reach Full Retirement Age During the Year
Imagine Mark is turning his full retirement age in September 2025. From January through August, earnings above $62,160 could trigger benefit reductions at $1 per $3. But after September (when he has reached full retirement age), there is no earnings limit, so he can earn freely without further reductions in benefits for the rest of the year. The withheld benefits will be reconciled when his monthly benefit is recalculated.
Scenario 3: You Are at or Beyond Full Retirement Age
Laura claimed Social Security benefits at age 68 and continues running her small business. Because she has already reached full retirement age, there is no earnings limit, so her net earnings from that business will not reduce her monthly payments. She continues to receive her full social security benefits regardless of business income.
Scenario 4: Self‑Employed with Variable Income
Bob is self employed and files for collecting social security benefits before full retirement age. In some months he works heavily, in others minimally. The Special Rule for self employed may allow Bob to count months when his net earnings are below the monthly threshold or he did not perform substantial services so those months would not trigger reduction. But careful tracking of gross wages, net income, hours, and documentation is required.
Interactions with Military Retirement Benefits, Pensions, and Other Income
Many clients receive military retirement benefits or have a pension or retirement plan outside Social Security. These forms of income do not count toward the earnings limit or trigger withheld benefits under the earnings test. The earnings test is solely based on earned income.
However, your total income, including adjusted gross income, investment income, capital gains, pension distributions, disability benefits, and other government benefits, may affect your tax status, Medicare premiums, and whether your Social Security benefits become taxable under combined income rules.
While they do not reduce the benefit amount because of work, other income streams do influence your overall retirement income plan. For instance, if your combined income is high, portions of your Social Security benefit may still be subject to taxation. That is distinct from the earnings limit process but weighs heavily in planning.
Additionally, before 2025, public sector retirees sometimes faced reductions via the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) that reduced their Social Security benefits when they also had pensions from non‑covered employment. As of January 5, 2025, those provisions have been repealed under the Social Security Fairness Act. This means many formerly penalized retirees now receive better Social Security retirement benefits and corrections are being processed.
Optimizing Timing: When to Claim, When to Work
Should You Delay Claiming Social Security?
If your goal is to maximize lifetime Social Security benefits, delaying your claim past your full retirement age is attractive. For every year you delay from FRA to age 70, you generate delayed retirement credits that increase your monthly benefit, typically around 8% per year. By waiting, you also avoid triggering the earnings limit while working.
If you have poor health or expect a shorter life expectancy, you might lean toward claiming earlier even if you work, accepting a lower benefit amount in exchange for current income.
Can Working Increase Your Final Benefit if You Already Claim?
Yes, if your work income during retirement replaces one of your lower‑earning years in your top 35. Your Social Security benefit could increase. In that sense, continuing to earn while collecting benefits may yield a higher benefit over time, especially if your new income is strong and sustained.
How Much Should You Earn? Balancing Income and Penalties
When you are not yet at full retirement age, you must weigh the benefit of extra income against the possibility of losing some benefit payments due to the annual earnings limit. Particularly for high earners, the tradeoff may not make sense. A financial advisor or tax professional can model scenarios based on expected earnings, projected life expectancy, and your other income sources.
That “Full Benefit” vs “Partial Benefit” Tradeoff
If you begin claiming before FRA, you’ll receive less than a full benefit (a reduced monthly benefit amount). Working doesn’t restore that reduction; it only allows recalculation of withheld benefits. In other words, if you claim early, your benefit amount is permanently lower. The choice to work while collecting should be considered in light of that permanent discount versus the immediate income need.
Planning Considerations: Taxes, Longevity, and Integration
Tax Consequences and AGI
Even though many retirees will find their Social Security retirement benefits untaxed federally beginning in 2025 under new tax rules (for many beneficiaries), your overall adjusted gross income, investment income, capital gains, and pension or retirement plan distributions can still influence tax liability. It’s critical to coordinate your income streams so that your total income, and taxable portion of benefits, is efficient.
Longevity, Life Expectancy, and Payout Strategies
Your average life expectancy, health, and financial goals matter. If you expect to live well past average life expectancy, maximizing your monthly payments via delayed claiming and controlled working may yield greater lifetime value. If your horizon is shorter, prioritizing earlier income might make sense.
Spousal Benefits and Survivor Considerations
When married, spousal benefits or surviving spouse benefits may influence when and how you claim. Your spouse’s age and ability to collect social security benefits based on your record, or their own earnings, impacts joint planning. If you delay, you may leave a larger benefit for your spouse or surviving spouse receives higher benefits.
Integrating Social Security Into Your Comprehensive Retirement Plan
Working while collecting social security benefits is only one piece of the puzzle. As fiduciary wealth managers, we encourage clients to treat Social Security as a key pillar in their retirement income plan, but one that must be integrated with:
- Pension or retirement plan distributions
- IRA, 401(k), and Roth withdrawal strategies
- Tax planning across multiple buckets (taxable, tax deferred, tax free)
- Longevity risk, average life expectancy, and required lifestyle spending
- Coordination between spouses, spousal benefits, and survivor planning
- Scenario modeling under varying employment status, expected earnings, and market conditions
A financial advisor or tax professional can run simulations: What happens if you continue working and exceed the earnings limit? What is the tradeoff in lifetime benefits if you delay claiming? Should you reduce work hours to avoid excess earnings penalties? Should you coordinate distributions in low income years?
FAQ: Common Questions About Working and Collecting Social Security Benefits
Can I work full‑time and still collect Social Security?
Yes, but if you are under full retirement age, your earnings above the annual limit (in 2025, $23,400) will lead to benefit payments being withheld. Once you reach full retirement age, there is no earnings limit.
Will working after claiming benefits increase my monthly benefit?
It can, if your new earnings replace previously low‑earning years in your top 35. But withheld months are only compensated through recalculation, not by lifting your permanent early claiming reduction.
How does self‑employment income factor into the earnings test?
Self‑employed income is counted toward the earnings limit, but a special rule may apply: months when you do not perform substantial services or your net earnings remain below the monthly threshold may not trigger benefit reduction. Document your hours and income carefully.
What kind of income is counted toward the earnings limit?
Only earned income, such as wages, commissions and vacation pay, bonuses, and net self‑employment profits count. Investment income, capital gains, pension or retirement plan distributions, military retirement benefits, disability benefits, and other government benefits are excluded.
Can my Social Security benefits be withheld indefinitely?
No. Once you reach full retirement age, withheld benefits are reconciled and your monthly benefit amount is adjusted upward to reflect the months of withheld payments. That said, the permanent reduction from claiming early remains.
What if I decide to delay collecting Social Security?
If you delay claiming until after full retirement age, your benefit amount grows via delayed retirement credits, and you avoid the earnings test entirely. That often yields a higher benefit over time.
If benefits are withheld now, will I ever get them?
Yes, up to a point. The Social Security Administration recalculates your benefit at full retirement age to deliver compensation for withheld months. But delaying, working strategically, and understanding the tradeoffs produce optimal long‑term results.
Conclusion
Yes, you can work and collect social security benefits, but your annual limit, earnings limit, your choice of retirement age based decisions, and timing of your claim all influence the outcome. The Social Security Administration provides for withheld benefits when you earn above thresholds, but those withheld amounts are reconciled once you reach full retirement age. Meanwhile, a delayed retirement strategy can yield a higher benefit over your lifetime, especially if paired with controlled work.
At Towerpoint Wealth, our goal is to help clients navigate these complex tradeoffs with a tailored plan that aligns with their goals, health, and expected longevity. If you’d like help modeling your optimal path, balancing work, claiming age, and total retirement income, let’s talk.
