Step 9: Be Mindful of the Earnings Test If You Work and Claim Early

What if you want to start receiving Social Security benefits but aren’t quite ready to stop working? You can absolutely do this, but you need to be aware of a rule called the “retirement earnings test.”

This rule only applies to people who claim their benefits *before* their Full Retirement Age (FRA) and continue to earn income from a job. If you are at or above your FRA, this rule does not apply to you—you can earn as much as you want without your benefits being affected.

Here’s how it works: If you are under your FRA for the entire year, the SSA will deduct $1 from your benefit payments for every $2 you earn above the annual limit. In the year you reach your FRA, a more generous limit applies, and the deduction is $1 for every $3 you earn above that limit (and only for earnings before the month you reach FRA).

These earnings limits change each year. You can find the current year’s limits on the SSA website.

It’s very important to understand that this money is not truly “lost.” The SSA doesn’t keep it forever. Once you reach your FRA, your monthly benefit will be recalculated to give you credit for the months your benefits were withheld. Over time, you will get that money back in the form of a slightly higher monthly check.

However, in the short term, the earnings test can significantly reduce your cash flow. If you plan to continue working, this rule might be a strong reason to consider waiting until at least your Full Retirement Age to start claiming your Social Security benefits.