The Earnings Limit Reduces Your Benefits by $1 for Every $2 You Earn Over the Threshold

If you claim Social Security before your full retirement age and work, the Social Security Administration will reduce your monthly benefit based on how much you earn. For 2024, if you earn more than $23,400 in a year, Social Security deducts $1 from your benefits for every $2 you earn above that amount. This reduction applies only in the year you claim and the years before you reach full retirement age.

The earnings limit changes each year — it is adjusted for inflation. The amount that triggers the reduction in 2024 is higher than it was in 2023, and it will likely be higher in 2025. You can find the current year's limit on the Social Security Administration website or by calling 1-800-772-1213.

The reduction is automatic. Social Security does not ask you to repay the money; they simply withhold it from your monthly payment. If your earnings are high enough that your entire benefit is withheld, you will receive no payment that month, but your benefit amount will increase when you reach full retirement age to account for the months you did not receive payments.

Key Takeaways

  • The earnings limit applies only if you claim Social Security before your full retirement age and continue to work.
  • Once you reach your full retirement age, there is no earnings limit — you can work and earn as much as you want without any reduction to your benefits.
  • The earnings limit is $23,400 for 2024, but this amount changes each year based on inflation.
  • Social Security counts only wages and self-employment income; investment income, pensions, and annuities do not count toward the limit.
  • Any months you do not receive a benefit due to the earnings limit will result in a higher benefit amount once you reach full retirement age.

When the Earnings Limit Stops Applying

The earnings limit disappears the month you reach your full retirement age. Your full retirement age depends on your birth year: if you were born between 1943 and 1954, it is 66; if you were born between 1955 and 1959, it is between 66 and 2 months and 66 and 10 months; if you were born in 1960 or later, it is 67.

Starting the month you turn your full retirement age, you can earn any amount without losing any Social Security benefits. This is true even if you have not yet stopped working or if you plan to work for many more years. The earnings limit is completely removed at that point.

If you reach full retirement age partway through the year, Social Security will apply the earnings limit only to the income you earned before that month. Income earned after you reach full retirement age does not count.

What Income Counts Toward the Earnings Limit

Social Security counts only wages from employment and net self-employment income. If you are an employee, your wages are what you report on your tax return. If you are self-employed, Social Security counts your net profit after business expenses.

These types of income do not count toward the earnings limit: investment income (dividends, interest, capital gains), rental income, pension payments, annuity payments, veterans benefits, workers compensation, unemployment benefits, or money you receive from selling an asset. If your retirement income comes mainly from investments or a pension, the earnings limit will not affect you even if you work part-time.

You must report your earnings to Social Security. If you are an employee, your employer reports your wages to the IRS, and Social Security receives that information. If you are self-employed, you report your net self-employment income on your tax return, and Social Security uses that figure. You do not need to contact Social Security separately to report earnings unless you think there is an error.

How the Reduction Is Calculated

The math is straightforward: subtract the earnings limit from your total earnings for the year, then divide by 2. That is the amount Social Security will withhold from your benefits.

Example: You claim Social Security at age 63 and earn $33,400 in 2024. The earnings limit is $23,400. You earned $10,000 over the limit. Social Security withholds $5,000 from your annual benefits ($10,000 ÷ 2 = $5,000). If your monthly benefit is $1,500, Social Security will reduce your payment by roughly $417 per month for the year, or they may withhold payments entirely for a few months until the $5,000 is deducted.

The reduction is spread across the months you receive benefits that year. Social Security does not require you to pay back the withheld amount; it simply does not send you a check for those months. When you reach full retirement age, your monthly benefit is recalculated to account for the months you did not receive payments, which increases your benefit going forward.

Reporting Your Earnings to Social Security

You do not need to file a separate form to report earnings. Social Security receives wage information from the IRS through normal tax reporting. However, if you are self-employed or if you expect your earnings to change significantly during the year, you may want to contact Social Security to update your estimate.

You can report earnings or ask about the earnings limit by calling Social Security at 1-800-772-1213, visiting your local Social Security office, or creating an account on ssa.gov. If you think Social Security has made an error in calculating your reduction, you can request a recalculation by providing documentation of your actual earnings.

If you earn significantly more or less than you expected during the year, your benefit reduction may be different from what Social Security estimated. Social Security will reconcile the actual amount when they receive your tax return. If you owe money back, they will deduct it from future benefits. If you overpaid (meaning Social Security withheld more than they should have), they will send you the difference.

Strategies for Working While Claiming Social Security Early

If you claim Social Security before full retirement age and want to continue working, you have a few options to consider. One approach is to claim at a later age — each year you delay claiming past your full retirement age, your benefit increases by 8 percent per year until age 70. If you can afford to wait, a higher benefit may offset the earnings limit reduction you would face by claiming early.

Another option is to claim at your full retirement age rather than earlier. This removes the earnings limit entirely and gives you a higher monthly benefit than you would receive if you claimed at 62. If you plan to work for several more years, this may be the better choice.

If you have already claimed and the earnings limit is reducing your benefits, you can request to suspend your benefits and restart them at a higher rate later. This option is available only if you have reached full retirement age. Suspending your benefits stops your monthly payments but allows your benefit to grow by 8 percent per year until age 70.

Frequently Asked Questions

Does the earnings limit apply if I am self-employed?

Yes. Social Security counts your net self-employment income (profit after business expenses) the same way it counts wages. If you are self-employed and earn more than the annual limit, your benefits will be reduced by the same formula: $1 withheld for every $2 earned over the limit.

What if I earn money after I reach full retirement age?

Once you reach full retirement age, the earnings limit no longer applies. You can earn any amount without any reduction to your Social Security benefits. This remains true for the rest of your life.

Can I get back the benefits that were withheld due to the earnings limit?

No, you do not receive the withheld payments as a lump sum. However, Social Security recalculates your monthly benefit when you reach full retirement age to account for the months you did not receive payments, which increases your benefit amount going forward. Over time, this higher benefit may recover some of what was withheld.

Does my spouse's earnings affect my Social Security benefit?

No. The earnings limit applies only to the person who claimed Social Security. Your spouse's earnings do not affect your benefit, and your earnings do not affect theirs. Each person's benefit is calculated and reduced independently based on their own income.

What if I did not report my earnings correctly?

Social Security receives wage information from the IRS. If there is a discrepancy between what you reported and what your employer reported, Social Security will reconcile it when they receive your tax return. If you owe money back, they will deduct it from future benefits. Contact Social Security if you believe there is an error.