Can I Take Social Security While Working?

Did you know you could end up owing thousands of dollars back to Social Security, even if you’ve already received the money? Sounds crazy, right? But it’s true. There’s one rule that catches a lot of people off guard. The Social Security earnings test. It’s one of the most misunderstood parts of Social Security. If you plan to keep working while collecting benefits, you need to know how it works.

What Is the Social Security Earnings Test?

The Social Security earnings test is a rule that affects people who collect benefits before full retirement age while still working. If you earn more than a certain amount, Social Security temporarily withholds part of your benefits. You don’t lose that money forever. Once you reach full retirement age, Social Security recalculates your payments and gradually adds back what they withheld through higher monthly checks.

Let’s break down common questions people ask about the earnings test and how to avoid costly mistakes.

5 Common Questions About the Earnings Test | What You Need to Know

It’s not fun to have your benefits reduced, but it’s better to understand the system now so you can plan ahead and avoid surprises. Below is a breakdown of how the Social Security earnings test works, what income is counted, and why it matters a lot if you’re planning to collect while still working.

Question 1: Will I Lose My Benefits Forever If I Keep Working?

The short answer is no. You won’t lose your Social Security benefits forever. But if you’re under full retirement age and you earn more than the yearly limit, your benefits may be temporarily withheld. The good news? You’re not losing the money permanently.

Social Security recalculates your benefits when you reach full retirement age and gradually gives it back through higher monthly payments for the rest of your life. So yes, you get it back, but you don’t suddenly get a big lump sum. You’ll see a steady increase in your monthly checks over time. Think of it like a slow payback.

Question 2: How Much Can I Earn in 2025?

In 2025, if you’re under full retirement age, you can earn up to $23,400 without affecting your Social Security benefits. If you earn more than that, Social Security will withhold $1 in benefits for every $2 you earn above the limit. In the year you reach full retirement age, the limit jumps to $62,160. The penalty is also smaller. You lose only $1 for every $3 you earn over that limit.

Things can sometimes get a little tricky here. Let’s look at an example. Say you turn full retirement age on July 1, 2025, and you earn $110,000 that year. Social Security only counts the earnings before you reach full retirement age, which in this case is January through June.

If you earned $55,000 during those six months, that’s below the $62,160 limit. So you wouldn’t lose any benefits due to the earnings test that year. This is part of what the Social Security Administration calls the “special rule.” It allows you to work part of the year before full retirement age without losing your benefits if your earnings stay under the limit.

If you want to learn more about this rule, you can find it directly on SocialSecurity.gov by searching for “Social Security special rule.”

Question 3: Does It Matter If My Spouse Is Still Working?

Maybe you want to start your Social Security benefits, but your spouse is still working and earning a good income. Does that affect your situation? The short answer is no. Social Security only looks at your own earnings when applying the earnings test to your benefits. Your spouse could earn $200,000 a year, and it wouldn’t affect your ability to collect your benefit.

However, things can get more complicated if you’re planning to take spousal benefits. These benefits are based on your spouse’s work record rather than your own. To qualify for a spousal benefit, your spouse must have already filed for their own benefits. If they’re still working and under full retirement age, they may delay filing because of the earnings test. Even once they do file, if you claim your spousal benefit before your own full retirement age, your monthly benefit will be smaller than the maximum amount you’d get by waiting.

Is There Anything Else You Can Do?

Here’s one possible approach. If you have your own work history and you don’t mind a slight reduction for filing early, you can start collecting your own benefits first. Later, when your spouse files, you can switch to a spousal benefit if it’s higher. The key is to see what makes sense for your household. Consider talking to a financial advisor for advice.

Question 4: What Types of Income Count Toward the Earnings Test?

What actually counts as income? Dividends? Pensions? IRA withdrawals? This is one of the most common areas of confusion. Many people assume that any income counts toward the earnings test, but that’s not true.

The Social Security earnings test only applies to earned income, or the money you make from working. That includes:

Wages from an employer (the amount shown on your W-2)
Net income from self-employment (after expenses)

If you’re self-employed, Social Security looks at your net earnings reported on Schedule SE of your tax return. That’s your profit after deductions like mileage, office supplies, and other business expenses.

What doesn’t count?

Dividends and interest
Pension payments
Withdrawals from your IRA or 401(k)

Question 5: How Does Social Security Know How Much I’m Earning?

Each year, Social Security asks you to estimate your expected earnings if you’re receiving benefits and still working.

They use that estimate to decide how much to withhold from your checks during the year. Later, they compare your estimate with your actual income from your tax return. If you earned more than expected, Social Security will ask you to repay the overpaid benefits. Sometimes they stop future payments until the balance is recovered. If you earned less than expected, you might get some of that money refunded to you.

It’s normal to worry about getting the estimate wrong. What if you think you’ll earn one amount but end up making more or less? As long as you make an honest, good-faith estimate, you’re fine. Mistakes happen, and Social Security knows this. If your income changes during the year, let them know. Honesty is always the best approach.

However, if you knowingly underreport your income or ignore Social Security’s requests for proof of earnings, you could face penalties like having to repay benefits, civil fines, and even criminal charges for fraud if it’s intentional.

Quick Recap: 2025 Earnings Limits

Here’s what to remember about the Social Security earnings test in 2025:

You can earn up to $23,400 before full retirement age without reducing your benefits.
If you earn more than that, Social Security withholds $1 in benefits for every $2 over the limit.
In the year you reach full retirement age, the limit increases to $62,160.
You’ll lose only $1 for every $3 earned over that higher limit.
Only income before your birthday month (when you reach full retirement age) counts toward the test.

Why the Earnings Test Exists & Why You Need to Know the Rules

The Social Security earnings test doesn’t punish people who keep working. It’s meant to balance the system. The idea is that Social Security benefits are designed to replace income when you retire. If you’re still working and earning a good salary, the government temporarily reduces benefits because you don’t fully “need” them yet.

Once you reach full retirement age, that logic disappears. You can work and earn as much as you want, and your benefits will no longer be reduced. So, the earnings test only affects people under full retirement age who are receiving benefits and still working.

The most important things to remember are:

The earnings test only applies before full retirement age.
It only counts earned income from work.
Withheld benefits aren’t lost forever.
Always report income changes honestly.

Knowing these rules can save you thousands of dollars and help you avoid the stress of overpayment letters or benefit suspensions.

How Paces Ferry Wealth Advisors Can Help

We’ve helped hundreds of people create a Social Security strategy that fits their goals and lifestyle. We look at your income, retirement age, and family situation to find the best time to file, whether that means taking your benefit early, delaying for a higher payment, or coordinating with your spouse’s benefits.

The rules are complicated, but with the right help, you can make smart choices that protect your income now and in the future. Contact Paces Ferry Wealth Advisors to schedule a call.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.