Email FacebookTwitterMenu burgerClose thin

What Is the Social Security Earnings Test?


Social Security is a federal insurance program that makes provision for benefits to be provided to retired people, those who encounter disabilities and their survivors. And if you plan on claiming benefits early and continue to work, the Social Security Administration will apply an earnings test to determine how much you will get. Here’s what you need to know about the Social Security earnings test.

If you are having trouble reaching your retirement savings goals, a financial advisor can help you create a financial plan for your needs.

How Does the Social Security Earnings Test Work?

The Social Security earnings test is a provision within the U.S. Social Security system designed to regulate the benefits of individuals who choose to claim their Social Security retirement benefits before reaching their full retirement age (FRA) and continue to work.

The purpose of this test is to prevent excessive double-dipping, where retirees simultaneously receive Social Security benefits and earn substantial incomes.

The earnings test works by setting an annual earnings threshold, above which a portion of the individual’s Social Security benefits may be withheld. If you claim benefits before your FRA and your earnings exceed the earnings limit, a portion of your Social Security payments will be withheld for every dollar you earn above that limit.

For individuals who will reach their FRA during the year, a different, higher earnings limit applies. In the year you reach your FRA, the Earnings Test has a higher limit, and it only applies to earnings in the months before you reach FRA.

Take note: If you claim benefits under full retirement age, the Social Security Administration will deduct $1 from benefit payments for every $2 earned above the annual limit of $21,240 in 2023. And if you’re in the year of full retirement age, it will deduct $1 in benefits for every $3 earn above $56,520.

Can You Lose Benefits to the Earnings Test?

A senior couple looking at their Social Security benefit increase after reaching retirement age.

The earnings test may cause you to lose a portion of your Social Security benefits temporarily. The specific reduction will depend on the age when you claim benefits and how much you earn above the set limit.

This reduction isn’t permanent, the Social Security Administration explains, since they are since they are withheld before reaching your FRA and then factored back into future Social Security payments.

The earnings test is designed to encourage continued work among retirees, while ensuring that benefits are distributed fairly and in accordance with work-related income. Therefore, understanding how early retirement can affect those benefits can help inform your retirement planning decisions.

Bottom Line

A senior couple reviewing their Social Security benefits after reaching full retirement age.

The Social Security earnings test plays a significant role in determining how much you can receive in benefits before reaching full retirement age. Based on the income limits and how much could get deducted, you may want to factor those reduced benefits into your retirement plan to get an accurate estimate of your overall finances.

Tips for Retirement Planning

  • A financial advisor can help you make a long-term retirement plan so you can live the golden years of your dreams. They can help you achieve that plan by managing your savings and investments as well. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • You can use SmartAsset’s free Social Security calculator to help you estimate what benefits you might earn in retirement.

Photo credit: ©, ©, © Picture Company