Social Security Earnings Test
The Social Security earnings test reduces Social Security retirement benefits for recipients who are below full retirement age and continue to work, withholding a portion of benefits when earned income exceeds an annual exempt amount — though withheld benefits are credited back as higher payments once the recipient reaches full retirement age.
The earnings test applies only to workers who collect Social Security retirement benefits before reaching their full retirement age (FRA). FRA is 67 for workers born in 1960 or later. For individuals below FRA for the entire year, Social Security withholds $1 in benefits for every $2 earned above the annual exempt amount ($22,320 in 2024). In the calendar year in which the individual reaches FRA, a more generous rule applies: $1 is withheld for every $3 earned above a higher threshold ($59,520 in 2024), counting only earnings in the months before the FRA birthday.
Once a beneficiary reaches full retirement age, the earnings test no longer applies regardless of how much they earn. There is no income limit for Social Security recipients who have reached their FRA.
The earnings test does not represent a permanent loss of benefits. When a recipient reaches FRA, the Social Security Administration recalculates the benefit, crediting back the months in which benefits were fully or partially withheld, effectively increasing the monthly payment going forward to compensate. However, the break-even period for recouping withheld benefits can be several years, and individuals in poor health may not live long enough to receive full recoupment.
Only earned income — wages and net self-employment income — counts against the earnings test. Investment income, pensions, rental income, interest, and dividends do not count. This makes the earnings test most relevant for individuals who claim Social Security early while continuing to work, and less relevant for retirees whose income comes primarily from investment portfolios.