Social Security earnings limit confusion at 65 - will my $36,000 income reduce my SS benefits?
I'm turning 65 in August and planning to claim Social Security while still working part-time as a consultant. My estimated annual earnings from work will be around $36,000, and I know there's some kind of earnings limit before Full Retirement Age. I've heard it's $24,300 for 2025 (the year I'm turning 65), but I'm confused about how this actually works. Will my entire SS benefit be reduced because I earn over the limit? Or is it just reduced by a certain amount for every dollar over? And does this earnings limit apply to the entire year I turn 65, or just the months before my birthday? I'm trying to decide if I should wait until I turn 66 and 2 months (my FRA) to avoid any reductions, but I really would prefer to start getting some benefits sooner. This is making my head spin! Any advice appreciated.
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Yuki Yamamoto
You're right to be concerned about the earnings test. For 2025, if you're under Full Retirement Age for the entire year, the limit is $24,300. But since you're turning 65 this year, you'll be subject to a different rule. In the year you reach FRA, the earnings limit is much higher (around $65,000 for 2025), and it only applies to earnings in the months BEFORE you reach FRA. So if you turn 65 in August, only your earnings from January-July count toward the limit. If you do exceed the relevant limit, SSA reduces benefits by $1 for every $2 earned over the limit for people under FRA for the full year, or $1 for every $3 earned over the higher limit in the year you reach FRA. Remember though, this isn't a permanent reduction. Once you reach your Full Retirement Age, you'll get the money back gradually through increased monthly benefits.
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Ethan Brown
•Thank you for explaining this! So if I understand correctly, since I turn 65 in August, I'd only count my January-July earnings toward the limit? That would be roughly $21,000 of my annual $36,000, which is under the $24,300 limit. Does that mean I wouldn't face any reduction at all?
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Carmen Ortiz
no no no the other reply is wrong. 65 isnt FRA for you if your turning 65 this year! FRA is 66 and 2 months for people born in 1960. so you'll have the lower limit until you hit your actual FRA next year. my brother got caught by this and lost a ton of$$
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Yuki Yamamoto
•You're partially right - I should have been clearer. The higher earnings test limit applies in the year you reach your FRA (66 and 2 months for someone born in 1960), not when you turn 65. So the OP would indeed be subject to the $24,300 annual limit for 2025 since they won't reach FRA until 2026. Thanks for the correction.
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Andre Rousseau
Just to clarify exactly how the reduction works if you earn over the limit: if you earn $36,000 in 2025 while collecting Social Security before your FRA, you'll be $11,700 over the $24,300 limit. That means SSA will withhold $5,850 of your benefits ($1 reduction for every $2 over the limit). The withholding isn't spread evenly - they'll actually withhold full monthly checks from the beginning of the year until the withholding amount is satisfied, then resume your regular payments. Also important - any benefits withheld are not lost forever. Once you reach your Full Retirement Age, SSA will recalculate your benefit amount to credit you for the months when benefits were withheld.
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Ethan Brown
•This is so helpful! I didn't realize they'd withhold entire monthly checks. So if my monthly benefit would be about $2,500, they might withhold the first 2-3 months of payments entirely? That changes my planning quite a bit. Maybe I should wait until I reach 66 and 2 months after all...
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Zoe Papadakis
I went through this EXACT same situation last year. Yes, they hold ENTIRE checks at the beginning of the year if you're going to be over the limit! It was a huge shock when I didn't get my first 3 months of payments. No one warned me about this!!! Btw after spending days trying to reach someone at SSA to explain this to me (kept getting disconnected or waiting HOURS), I found this service called Claimyr that got me through to a real person at SSA in under 20 minutes. You can see how it works here: https://youtu.be/Z-BRbJw3puU and their site is claimyr.com. Seriously saved my sanity when trying to figure out my benefit situation.
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Ethan Brown
•Thanks for the tip! I've been trying to reach someone at SSA for days and keep getting disconnected. Will definitely check out that service if I can't get through soon. I really need to talk to someone to understand exactly how this will affect me before making my decision.
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Jamal Carter
My 2 cents - just wait until your full retirement age!!! I tried getting benefits at 65 while still working and it was a NIGHTMARE dealing with SSA and their complicated rules. The amount you lose with the earnings test plus the permanently reduced benefit from claiming early just isn't worth the hassle.
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AstroAdventurer
•Completely agree. A lot of people miss that the earnings test is just ONE factor. Even if you manage the earnings test, starting at 65 instead of your FRA of 66+2mo means you're taking a permanent reduction of about 7.8% in your benefit amount. That's FOREVER. With your earnings level, waiting those extra 14 months to reach FRA would likely be the financially optimal choice, especially if you're in good health and expect to live past your early 80s. The math simply works out better in most scenarios.
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Mei Liu
Does anyone know if 401k withdrawals count as "earnings" for the Social Security earnings limit? I'm in a similar situation and trying to figure out if I can take some 401k distributions without affecting my benefits.
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Andre Rousseau
•No, 401k withdrawals don't count toward the earnings limit. The earnings test only applies to wages from employment or net earnings from self-employment. Pensions, annuities, investment income, interest, 401k/IRA withdrawals, and other government benefits don't count toward the limit. Only actual work-related earnings matter for this purpose.
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Ethan Brown
After reading all your responses, I'm leaning toward waiting until my Full Retirement Age now. The combination of the earnings test withholding whole checks plus the permanent reduction for claiming early doesn't seem worth it. I'm healthy and both my parents lived into their 90s, so maximizing my lifetime benefits probably makes more sense. One last question - if I do decide to claim at 65 despite the earnings limit, do I need to notify SSA about my expected earnings when I apply? Or do they just find out when tax returns are filed?
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Yuki Yamamoto
•You should definitely tell SSA about your expected earnings when you apply. They'll use that estimate to determine if any benefits should be withheld upfront. If you don't, and then they discover later (after tax returns are filed) that you earned over the limit, you could end up with an overpayment that you'd have to pay back. You can also contact them during the year if your earnings estimate changes. Being proactive helps avoid surprises. If you work with an employer, SSA will eventually get your actual earnings information through payroll tax reporting.
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Carmen Ortiz
why is this system so COMPLICATED??? I swear they make it confusing on purpose so people mess up and lose money. i'm 63 and give up trying to understand when i should file. probably just gonna wait till 70 and avoid this headache!!!
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Jamal Carter
•Same! I don't trust myself to figure this out correctly and every time I call SSA I get a different answer. Waiting till 70 simplifies everything (and gets you the most $).
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