For many seniors, Social Security can mean the difference between enjoying a comfortable retirement and struggling to make ends meet.
However, according to a 2024 study from the Nationwide Retirement Institute, 55% of U.S. adults admit their benefits are not enough to cover basic needs in retirement. Another study by an investment management company T. Rowe Price It also found that 20% of retirees work full-time or part-time, and nearly half do so for financial reasons.
Working after retirement is a smart way to create financial security, but in some cases, your income can reduce your Social Security benefits. Here's what to expect heading into 2025.
A retirement income test is an income limit that may result in a reduction in your benefits, and there are three requirements that must be met before you are subject to the limit.
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You must currently be collecting Social Security retirement benefits. spousal allowanceor survivor benefits.
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you need to be under you full retirement age (France).
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You must have an income (such as a salary from a job).
If you check all of these boxes, a portion of your benefits will be temporarily garnished if your income exceeds a certain threshold. The higher your income, the greater the reduction in benefits.
Although retirement income testing is not a new concept, the income limits themselves typically vary from year to year. The good news is that the threshold will increase in 2025, so you can earn even more before facing a cut.
There are two limitations to the earnings test. One for those who are well below FRA and one for those who will reach FRA this year. If you reach your FRA in 2025, only your income in the months leading up to your actual FRA will count toward your limit.
|
|
2024 income limits |
Income limits for 2025 |
Reduction in benefits |
|---|---|---|---|
|
If you are eligible for FRA |
$22,320 per year |
$23,400 per year |
$1 for every $2 over limit |
|
If you reach FRA this year. |
$59,520 per year |
$62,160 per year |
$1 for every $3 over limit |
Data source: Social Security Administration. Table by author.
For example, let's say you're 66 and reach your FRA in 2025. Let's also say you earn $60,000 in the months leading up to FRA. In 2024, that income will exceed the $59,520 annual limit and reduce your monthly payments.
However, starting in 2025, your income will be below the new annual limit of $62,160, assuming your income remains the same. This means you won't see any reductions and will keep all your benefits.
