Whether it’s boredom or financial stress, many retirees go back to work after filing for Social Security.
About 19% of Americans 65 and older were still working, according to the Pew Research Center [1].
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But some of these workers may be exposing themselves to an unexpected expense: Social Security deductions. The Social Security Administration’s (SSA) annual earnings limit is a rule that is often overlooked, not just by retirees but also by some financial experts.
Here’s how this special rule could end up costing you thousands of dollars.
Annual earnings test
According to the SSA [2], you are technically considered retired if you file for benefits. However, that doesn’t mean you are not allowed to work. However, the administration reviews the annual income of all beneficiaries and has specific limits for those under the full retirement age (FRA).
If you are under the FRA in 2025, you can earn up to $23,400 per year without any of your benefits withheld. Beyond that, the SSA will deduct a dollar for every $2 earned. The limit is set at $62,160 in the year you reach FRA. For those who fall further beyond that limit, the administration deducts one dollar for every $3 earned.
Simply put, if you retire early but are still earning a comfortable income from part-time, full-time or even freelance work, you could lose thousands in benefits. But, the SSA only considers earned income for this calculation.
Pensions, annuities, investment income, interest, veterans’ benefits or other government retirement benefits are not counted.
Additionally, there are other rules for those who live abroad [3] or are temporarily working [4] in the year they filed for benefits.
Unfortunately, many retirees overlook the annual earnings limit when they go back to work. Some financial advisors might even struggle to model this accurately for their clients because they can’t predict when or if you will re-enter the workforce after you file for benefits.
The good news is that these deductions are not permanent.
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Funds are not lost forever
“If some of your retirement benefits are withheld because of your earnings, your monthly benefit will increase starting at your full retirement age,” the SSA notes on its website. “This takes into account those months in which benefits were withheld.”
In other words, your deductions are not lost forever.
If you are concerned about the issues that such deductions could cause, you may want to seek the advice of a financial expert. For instance, you can cancel your benefits applications within 12 months of approval, according to the SSA [5]. This allows you to go back to work and reapply for benefits later.
If you take this route, you may have to repay any benefits received during that 12-month window. You may come out ahead if the opportunity you take up is a lucrative gig and helps to delay retirement.
It’s helpful to think of the SSA’s earnings test as a puzzle rather than a penalty. Getting it wrong could cost you thousands of dollars, but with the right strategy, you could recover that amount and more over time.
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[1]. Pew Research. “The growth of the older workforce”
[2]. Social Security Administration. “Receiving Benefits While Working”
[3]. Social Security Administration. “Cancel your benefits application”
[4]. Social Security Administration. “Your Payments While You Are Outside the United States”
[5]. Social Security Administration. “How Work Affects Your Benefits”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.