The Social Security Test You Should Expect If You're Under Retirement Age

Social Security is a part of life for anyone who works in the United States (as well as Americans working abroad), but it is not always the easiest thing to understand. The rules can be tricky and there seem to be changes every year. This year is certainly no exception, with several changes affecting things like Social Security taxes, in-office services, and the annual COLA. The Retirement Earnings Test, or RET, has also changed, with an increased threshold for earnings for the year 2025.

The RET is a tool that the Social Security Administration uses to determine how much will be withheld from a beneficiary's monthly Social Security payment, and it applies to anyone who claims Social Security benefits prior to reaching their Full Retirement Age (FRA). There are two exemption limits, a lower amount and a higher amount ($23,400 and $62,100, respectively), and if your annual earnings exceed the retirement earnings test exempt amount, the Social Security Administration will withhold $1 for each $2 earned above the lower exemption amount and $1 for every $3 above the higher exemption amount. The exemption amounts have been rising gradually since 2013, when they had seen four years of stability. This year's threshold amounts represent a significant increase from 2024, when they ranged from a lower earnings amount of $22,320 and a higher earnings amount of $59,520.

American workers who have paid into Social Security throughout their careers are eligible to start taking benefits as soon as they reach age 62, but Full Retirement Age (FRA), or the age which the Social Security Administration has determined you are eligible for your full retirement benefit, is actually different. What makes the FRA so complicated is that it changes depending on the year you were born, and therefore there is no universal number that Americans can look forward to. Instead, each person must calculate their own retirement age and determine when the best time is for them to stop working and when to start taking benefits (and just for a quick reminder — yes, you can do both). Currently, for anyone turning age 62 during the calendar year 2025, the Full Retirement Age is 67 years old.

It is important to note, however, that just because you elect to take your Social Security benefits early and are okay with the earnings withholdings resulting from the RET, you still won't be eligible to receive Medicare until you reach 65. The rules for receiving Medicare once you reach the eligibility age are a bit different if you are still working. Ordinarily, signing up late for Medicare results in penalties, but if you are still working you may be able to get these penalties waived (specifically, if you are still enrolled in a health insurance plan through your job).

One of the most important things to know about how working affects your Social Security benefits is that it is only relevant while you are still working, meaning that the Retirement Earnings Test only applies to working individuals collecting Social Security who are below their Full Retirement Age. Once you reach the full benefit age, the test stops being applied to your earnings, however the adjusted benefit amount won't take effect until the start of the following calendar year — for example, if you reach FRA in September of 2025, you won't receive the full benefit until January of 2026.

Some people prefer to wait until they reach Full Retirement Age to claim any benefits and still continue to work. This not only eliminates the need to worry about the Retirement Earnings Test, but it also allows you to receive something called Delayed Retirement Credits, which will give you up to additional benefits (up to 8%) depending on how many months you delay retirement up to age 70. But for those who opt to take their benefits early and keep working, it is important to be aware of the RET rules, as running afoul of threshold limits for earnings and asset holdings can seriously impact your ability to keep drawing benefits.

Whether you are worried about the status of Social Security or simply trying to make the best plan for your financial stability in retirement, Social Security is a chronically hot topic. Issues like the Retirement Earnings Interest Test, even though the test is dropped for everyone once they reach Full Retirement Age, can significantly someone's decision about continuing to work while claiming Social Security benefits.