What is the Social Security Earnings Test & How Does It Affect Your Retirement Income?

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If you claim Social Security benefits before reaching full retirement age and continue to work and earn above a certain threshold, you may be subject to the retirement earnings test. This could result in withheld benefits, so it’s important to understand these thresholds and how the earnings test limit could affect you.

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The earliest age someone can sign up to receive Social Security benefits is age 62; however, you’re not entitled to your full monthly benefit until you reach full retirement age, which depends on your year of birth. Once you reach full retirement age, or FRA, you don’t have to worry about additional income impacting your benefits.

The earnings test reduces Social Security benefits before you reach FRA and then increases benefits for the remainder of your life when you reach FRA. Don’t worry — benefits withheld while you work are not lost and are added to your monthly benefits later.

For those attaining normal retirement age after 2023, the annual exempt amount is $21,240. For those attaining normal retirement age in 2023, the annual exempt amount is $56,520. The higher amount only applies to earnings made in months prior to the month of normal retirement age attainment.

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When earnings exceed exempted amounts, $1 in benefits for every $2 of earnings in excess of the lower exempt amount and $1 in benefits for every $3 of earnings in excess of the higher exempt amount is withheld.

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The earnings test shouldn’t stop you from working in retirement, but you should be aware of the limits before making a commitment. If you’re interested in seeing the impact of the retirement earnings test on retirement benefits, you can use the Social Security Administration’s Retirement Earnings Test Calculator here.

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