There's a reason a good number of older Americans opt to work in some capacity even once they've made their retirement official. For one thing, the extra money is always helpful.
The average retired worker on Social Security today only collects about $1,924 per month. That's a pretty bare bones income. So if you're in line for a similar payday and you don't have a lot of retirement savings to fall back on, taking a part-time job of some sort could make financial sense.
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There are also benefits to working in retirement that aren't financial. Even if you're OK savings-wise and don't need the added income, a job could serve as not just a social outlet, but a reason to get out of the house. And even if you only work one day a week, you may find that having a job as part of your routine is a good thing for your mental health.
The good news is that Social Security allows beneficiaries to earn money from a job. The bad news is that the rules get a little complicated if you haven't yet reached your full retirement age.
How the Social Security earnings-test limits work
Once you reach full retirement age, you can earn any amount of money from a job without having to worry about a reduction in your monthly benefits. But if you work while on Social Security before reaching full retirement age, your monthly checks could be reduced if you exceed the program's earnings-test limit.
Now that limit can change from year to year, and it also depends on your age. This year, workers on Social Security can earn up to $22,320 before having benefits withheld. Beyond that, $1 in benefits is withheld per $2 of earnings. In 2025, this limit is increasing to $23,400.
But here's where things get a touch more complex. The Social Security earnings-test limit is different for people who reach full retirement age within a given year.
We just learned that 2024's earnings-test limit is $22,320. But if you started off the year having not reached full retirement age and you've since reached it, or you will be reaching it before 2024 is over, then your earnings-test limit is $59,520.
Beyond that, $1 in benefits is withheld per $3 of earnings, not $2. And in 2025, the earnings-test limit for people reaching full retirement age within the calendar year is rising to $62,160.
What happens to your benefits when you exceed the earnings-test limit?
As mentioned, you'll have a portion of your Social Security checks withheld for exceeding the earnings-test limit. But that doesn't mean you're giving up that portion of your benefits forever.
Once you reach full retirement age, withheld benefits are paid back to you. So you're not forfeiting that money so much as forcing yourself to wait to collect it.
However, there's a permanent reduction in benefits that applies to people who claim Social Security before reaching full retirement age. So if you're going to take that hit, make sure it's worth it. If you'll be earning enough that you're going to exceed the earnings-test limit for the year, then you may be able to hold off on claiming Social Security, thereby growing your monthly benefit.
All told, it's important to know the rules if you're going to work and collect Social Security at the same time. You do get a nice amount of leeway to earn money without losing a portion of your monthly checks. But make sure to commit the earnings-test limits to memory each year they apply to you to avoid financial stress.
