Can you work while collecting Social Security? Here's what to know in 2025
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.
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.
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:
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 Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
The $23,760 Social Security bonus most retirees completely overlook
Offer from the Motley Fool: 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. JoinStock Advisorto learn more about these strategies.
View the "Social Security secrets" »
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
The First Thing Retirees Should Do With Funds From the Social Security Fairness Act
The Social Security Fairness Act, passed at the end of President Joe Biden's term in 2024, removed the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) and made it possible for many public servants to earn Social Security income on top of their other retirement plans. As a result, many retirees are now receiving, or will soon receive, an influx of Social Security funds. Additional income for retirees is typically very welcome, but it can also lead to a temptation to overspend. Here, three different financial experts suggest the first thing you should do with your additional income. Check Out: Read Next: The first thing you should do with any influx of funds you receive from the Social Security Fairness Act is create or contribute to an emergency fund, according to Eric Steffy, founder and CEO of Federal Solutions Support. 'Life happens and having an emergency fund for a time when you'll face unexpected costs can keep you from racking up high-interest charges on a credit card, taking high-interest loans or dipping into accounts budgeted for daily expenses,' he said. Ideally, your emergency fund should have at least $10,000 in it, though some people are able to ensure they have an even larger cushion. 'Having an emergency fund is a critical step for ensuring financial stability and providing a safety net during unexpected events,' Steffy said. For seniors, the No. 1 big-ticket expense is, perhaps surprisingly, unexpected dental bills, because most costly dental procedures aren't covered by Medicare. The second-largest unexpected financial event is changes in housing costs or property assessments. Watch Out: Jason LaBarge, president at LaBarge Financial, suggested your first move be to review your high-interest debt and make a plan to pay it off as soon as possible. 'Credit card interest rates are usually over 20%, and that can cripple your finances over time. Use this opportunity to get yourself out of debt and back on track to achieving your retirement goals,' LaBarge said. Debt payoff was another suggestion by Steffy. 'Receiving an unbudgeted windfall may tempt you to make a few things on your wish list come true: that dream trip, new car or home improvement project. It's fun to go for that wish list but it may be even more satisfying to erase stress by reducing debt,' he said. He pointed out that for most retirees, carrying a mortgage, car loan or credit card debt while also paying for food, healthcare and often contributing to the support of others 'can create a sense of vulnerability.' Paying off debt first means you can indulge in leisure activities or make your life more comfortable after. If you receive extra Social Security payments, the first thing you should do is put that money into something that will benefit you for the rest of your life, according to Melanie Musson, a finance expert with 'What that looks like will depend on the individual and their investment portfolio,' she said. LaBarge added, 'This would give your money the chance to grow with the market and be available for when you're ready to do something fun.' If you have properly saved for retirement, you will more comfortable treating yourself with the extra cash. A final tip from Musson is that you should 'keep your monthly budget exactly the same as it was before.' Then, you can take your extra income and save it, invest it and build extra financial security or a legacy to leave to your heirs. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 The 10 Most Reliable SUVs of 2025 Clever Ways To Save Money That Actually Work in 2025 This article originally appeared on The First Thing Retirees Should Do With Funds From the Social Security Fairness Act
Yahoo
2 hours ago
- Yahoo
Is It Worth Delaying Claiming Social Security If It Means Withdrawing More From Your 401(k)?
One of the most common dilemmas people face as they near retirement is whether to start collecting Social Security or delay it for a higher monthly benefit. But delaying Social Security often means relying more heavily on other resources, like a 401(k) or other savings, to fill the gap. Is it worth it? Read More: Find Out: 'When it comes to decisions about money, it is a matter of feeling in control and not feeling anxious or stressed,' said Trevor Houston, CEO at ClearPath Wealth Strategies in Frisco, Texas. 'One of the most common questions is whether to wait for the Social Security payments or to take money out of the 401(k) plan early.' Here's what to consider before tapping your 401(k). Delaying your Social Security retirement benefits beyond full retirement age (FRA) results in a higher monthly benefit amount until age 70. 'If you delay taking Social Security, the monthly check will increase by about 8% each year until you reach age 70. That's equivalent to getting a salary increase every year,' Houston explained. 'Pretty nice, right? However, the strategy of waiting only makes sense if you have enough in savings, investments or your 401(k) to cover your bills while you are waiting.' Here are some important factors to consider: Life expectancy: Do you have any serious health conditions? Have your parents and grandparents lived long lives? If you're in good health, waiting could give you a bigger monthly check. On the other hand, Houston explained that if your health or family history suggests a shorter life expectancy, it may make sense to claim Social Security early and use the money while you can. Monthly living expenses: How much money do you need every month to pay your basic living expenses? 'If you start taking out your 401(k) too early, you could end up short later on, especially if the market declines,' Houston said. This is called sequence risk, which could disrupt your retirement plan. A 2024 Vanguard report found that the average 401(k) balance for those age 65 and older is $272,588. However, the average is often skewed by high earners, and the median balance is $88,488. Taxes: Money from your 401(k) is taxed as ordinary income. According to Houston, taking out large sums of money could push you into a higher tax bracket. Safety and security: A stable monthly income provides a feeling of safety and security. 'Some people like to have the Social Security check coming into their account each month. It feels like a regular paycheck, and that provides a great deal of peace of mind during retirement,' he pointed out. Discover More: To show when this strategy might work, Houston provided an example: Let's say David reaches age 66, is in good health, and his parents are in their 90s. His 401(k) balance is around $400,000, and he doesn't need Social Security to pay bills or meet other financial needs. David chooses to delay Social Security and withdrawal from his 401(k) instead. Also, because of his conservative risk tolerance, his 401(k) generates a 5% annual growth rate, less than the 8% annual increase he'd get by waiting on Social Security. 'At the end of the day, waiting for Social Security and using your 401(k) could be a smart strategy if you have enough savings, and you expect to live a long time. But everyone's situation is different,' Houston wrote. 'A financial professional should evaluate your personal goals to determine the best course of action for your specific situation.' More From GOBankingRates 9 Downsizing Tips for the Middle Class To Save on Monthly Expenses This article originally appeared on Is It Worth Delaying Claiming Social Security If It Means Withdrawing More From Your 401(k)? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 hours ago
- Yahoo
Is It Worth Delaying Claiming Social Security If It Means Withdrawing More From Your 401(k)?
One of the most common dilemmas people face as they near retirement is whether to start collecting Social Security or delay it for a higher monthly benefit. But delaying Social Security often means relying more heavily on other resources, like a 401(k) or other savings, to fill the gap. Is it worth it? Read More: Find Out: 'When it comes to decisions about money, it is a matter of feeling in control and not feeling anxious or stressed,' said Trevor Houston, CEO at ClearPath Wealth Strategies in Frisco, Texas. 'One of the most common questions is whether to wait for the Social Security payments or to take money out of the 401(k) plan early.' Here's what to consider before tapping your 401(k). Delaying your Social Security retirement benefits beyond full retirement age (FRA) results in a higher monthly benefit amount until age 70. 'If you delay taking Social Security, the monthly check will increase by about 8% each year until you reach age 70. That's equivalent to getting a salary increase every year,' Houston explained. 'Pretty nice, right? However, the strategy of waiting only makes sense if you have enough in savings, investments or your 401(k) to cover your bills while you are waiting.' Here are some important factors to consider: Life expectancy: Do you have any serious health conditions? Have your parents and grandparents lived long lives? If you're in good health, waiting could give you a bigger monthly check. On the other hand, Houston explained that if your health or family history suggests a shorter life expectancy, it may make sense to claim Social Security early and use the money while you can. Monthly living expenses: How much money do you need every month to pay your basic living expenses? 'If you start taking out your 401(k) too early, you could end up short later on, especially if the market declines,' Houston said. This is called sequence risk, which could disrupt your retirement plan. A 2024 Vanguard report found that the average 401(k) balance for those age 65 and older is $272,588. However, the average is often skewed by high earners, and the median balance is $88,488. Taxes: Money from your 401(k) is taxed as ordinary income. According to Houston, taking out large sums of money could push you into a higher tax bracket. Safety and security: A stable monthly income provides a feeling of safety and security. 'Some people like to have the Social Security check coming into their account each month. It feels like a regular paycheck, and that provides a great deal of peace of mind during retirement,' he pointed out. Discover More: To show when this strategy might work, Houston provided an example: Let's say David reaches age 66, is in good health, and his parents are in their 90s. His 401(k) balance is around $400,000, and he doesn't need Social Security to pay bills or meet other financial needs. David chooses to delay Social Security and withdrawal from his 401(k) instead. Also, because of his conservative risk tolerance, his 401(k) generates a 5% annual growth rate, less than the 8% annual increase he'd get by waiting on Social Security. 'At the end of the day, waiting for Social Security and using your 401(k) could be a smart strategy if you have enough savings, and you expect to live a long time. But everyone's situation is different,' Houston wrote. 'A financial professional should evaluate your personal goals to determine the best course of action for your specific situation.' More From GOBankingRates 9 Downsizing Tips for the Middle Class To Save on Monthly Expenses This article originally appeared on Is It Worth Delaying Claiming Social Security If It Means Withdrawing More From Your 401(k)?
