How the Earnings Limit Works in 2025

If you claim Social Security before your full retirement age (FRA) and continue to earn income, Social Security applies an earnings test.

Here’s what that looks like:

• Before FRA (all year): Social Security deducts $1 for every $2 you earn over $23,400.
• In the year you reach FRA: They deduct $1 for every $3 you earn over $62,160.

On the surface, it seems like you’re being penalized for working.

Many people hear this and think, “I’m losing my benefits!”

But that’s not the whole story…

The Key: It’s Withheld, Not Lost

Here’s the part most people don’t realize:

Once you reach full retirement age, Social Security recalculates your benefit.

You get credit for every month payments were withheld.

That means your check gets permanently increased going forward.

So yes, your benefits are reduced while you’re working — but you recoup that money through higher monthly income for life.

In other words, you’re not losing benefits.

You’re simply deferring them.

Why Many People Delay Instead

Even though you’ll eventually recover withheld benefits, many retirees still choose to delay Social Security.

Why? Because waiting provides other advantages:

• Built-in Growth: Each year you delay (up to age 70), your benefit grows about 7–8% annually.
• Tax Efficiency: Delaying can help you avoid higher taxes, especially when combined with smart withdrawal strategies.
• Income Planning Flexibility: Annuities and other guaranteed income sources can fill the gap, letting Social Security grow in the background.

By layering these strategies, many of my clients create a retirement paycheck that’s larger, safer, and more tax-efficient.

The Tax Trap to Watch Out For

Here’s another wrinkle: Social Security isn’t always tax-free.

Up to 85% of your benefits can become taxable once your provisional income crosses these thresholds:

• $32,000 for single filers
• $44,000 for married couples

That extra taxable income can:

• Trigger taxes on your Social Security benefit itself
• Push other income into higher tax brackets
• Increase Medicare premiums down the road

This is why many retirees strategically delay claiming benefits and use other income sources (like annuities or tax-free Roth withdrawals) early on.

Bottom Line

If you claim Social Security early while working, don’t panic — you’re not permanently losing benefits.

You’re just deferring them until full retirement age.

But if your goal is to maximize income, minimize taxes, and avoid surprises, it often makes sense to build a guaranteed income plan and delay Social Security.

That way, you get the best of both worlds:

Higher lifetime benefits and a retirement paycheck that’s secure, predictable, and tax-smart.

Curious what this could look like for your situation? Let’s chat.