Working While Receiving Social Security: Understanding the Rules

Can you work and collect Social Security benefits at the same time? The short answer is yes, but it depends on your personal situation. In some cases, workers who receive retirement benefits, or other types of Social Security benefits, can see some or all of their monthly benefits temporarily go away.

That's where the Social Security earnings test comes in. In a nutshell, depending on your age and how much earned income you have, some or all of your Social Security benefits can be withheld.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Does the earnings test apply to you? And if it does, what can you expect to happen to your Social Security benefits? Here's a quick rundown of what all working seniors need to know.

Image source: Getty Images.

The 2025 Social Security earnings test

For the purposes of the Social Security earnings test, beneficiaries who have applied for retirement benefits fit into three categories. Each category has different rules and limitations when it comes to the potential withholding of benefits. So the first step in figuring out how the earnings test could affect you is to determine which category you fall into, expressed as such:

• You will reach your full Social Security retirement age after.
• You will reach (or have reached) your full Social Security retirement age during.
• You reached full retirement age before.

If you're in the third category, it's an easy answer: The Social Security earnings test does not apply to you. You can work and earn as much money as possible, and it won't affect your Social Security payments whatsoever.

If you're in one of the first two categories, the general idea is that some or all of your Social Security benefits can be withheld if your income exceeds a certain threshold.

Here's what I mean. If you will reach your full retirement age after 2025, the earnings test is the most restrictive. You can earn up to $23,400 for the year, or $1,950 per month, with no impact to your benefits. Beyond that, $1 of your Social Security benefits can be withheld for every $2 in earnings.

For example, if you earn $30,000 in 2025 and won't reach full retirement age during the year, you will have exceeded the earnings test threshold by $6,600. That means $3,300 would be withheld from your Social Security checks.

Finally, if you reach your full retirement age during 2025, the earnings test limit is much higher at $62,160, or $5,180 per month, and only months before your birth month are considered. In other words, if your birthday was April 12, only earnings from January through March are subject to the earnings test. Furthermore, for earnings above the threshold, $1 is withheld for every $3 in excess earnings.

Should you wait to claim Social Security if you're still working?

First, I want to point out that I deliberately used the word "withheld" when discussing the earnings test limits. If you exceed the earnings test limits and get a lower Social Security benefit as a result, the withheld benefits are not necessarily lost. Once you reach full retirement age, your monthly Social Security payment will be adjusted upward to reflect any withheld money.

Second, there's no perfect answer to the question of whether you should claim Social Security while you're still working if the earnings test is likely to affect you. Depending on your financial situation, it could certainly make sense to claim benefits even if some of the money is likely to be withheld. But on the other hand, if you're working and don't necessarily need the extra money, it could make more financial sense to wait.

The bottom line is that the Social Security earnings test is a big factor in determining whether older adults who are still working should claim benefits before full retirement age. But it isn't the only factor. It's important to consider your financial situation, family situation, health, and more to decide the best move for you.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.