Navigating the Rules Surrounding Concurrent Employment and Social Security Benefits
Understanding the Social Security Earnings Test for 2025
The Social Security earnings test can significantly impact the decision of older adults who are still working about claiming benefits before their full retirement age. Here's a breakdown of the key rules and limits for 2025.
Before Full Retirement Age
If you are yet to reach your full retirement age, the earnings limit is set at $23,400 for the year. For every dollar earned above this limit, one dollar will be withheld from your Social Security benefits.
Year of Full Retirement Age
If you reach your full retirement age during 2025, the earnings limit increases to $62,160. However, it's important to note that this limit only applies to earnings before your birthday month. For months after your birthday, there is no limit, and withheld benefits will be recalculated and returned via higher payments later.
At or Beyond Full Retirement Age
Once you have reached your full retirement age, there is no earnings limit, and you can earn any amount without reduction in your Social Security benefits.
Special Rules
The earnings test uses a monthly limit in the year you begin collecting, so months after you start benefits do not count towards earnings limits for that year. Special rules also apply if you retire in the year you reach your full retirement age, allowing full benefits for months counted as retired even if annual earnings exceed limits.
Categories of Beneficiaries
The rules and limitations for each category of beneficiaries are different when it comes to the potential withholding of benefits. The first step in understanding how the earnings test could affect you is to determine which category you fall into.
Additional Information
These limits are indexed annually to adjust for inflation. The Social Security earnings test applies to individuals who have applied for retirement benefits and are below their full Social Security retirement age.
| Age Category | Earnings Limit (2025) | Benefit Reduction Rate | |----------------------------|----------------------|-------------------------------| | Under Full Retirement Age | $23,400 | $1 withheld per $2 over limit | | Full Retirement Age year | $62,160 | $1 withheld per $3 over limit | | At or Beyond Full Retirement Age | No limit | No withholding |
When considering whether to claim Social Security benefits while still working, it's essential to take into account factors such as your financial situation, family situation, health, and more, in addition to the earnings test.
Coordinating personal-finance plans becomes crucial when deciding to claim Social Security benefits before retirement. The earnings limit for individuals under their full retirement age in 2025 is $23,400, and every dollar earned above this limit results in a $1 reduction in Social Security benefits. additionally, knowing the categories of beneficiaries and their specific earnings limits is essential for effectively managing personal-finance during this period.
