One of the benefits of waiting until at least full retirement age to claim Social Security is that you are not required to pass the benefits earnings test, if you’re still working.

The Social Security Administration applies an annual earnings test which involves temporarily withholding $1 of a worker’s benefits for every $2 earned over $21,240 (in 2023). In the year that the worker attains full retirement age, the earnings test is more generous; $1 in benefits for every $3 in earnings above $56,520 for someone reaching full retirement age (in 2023).

The earnings test is no longer relevant once a worker reaches full retirement age. The worker can earn as much as he or she desires and the monthly benefit will be adjusted to reflect all the benefits that were forfeited previously.

In order to prevent workers who retire in the middle of the year from being penalized, the Social Security Administration will apply a monthly earnings test and set your payments according to whichever test is better for you. This test can only be used for one year; usually the first year of retirement. For anyone who passes the monthly earnings test, he/she can receive 100% of benefits for the entire month that Social Security considers him/her retired, regardless of total annual earnings. The earnings tests count only earned income from a job or self-employment; investment income and retirement-plan withdrawals are not counted.

If you have not reached full retirement age for all of 2023, you are considered retired in any month you earn $1,770 or less. If you reach full retirement age in 2023, Social Security considers you retired in any month when your earnings were $4,710 or less.

Consider this scenario. A beneficiary turns 62 in June. The beneficiary decides to start collecting benefits in July after working all year through June and he makes $80,000 for all of 2023. On an annual basis, he wouldn’t receive any Social Security benefit. However, in July through December, if he earns $1,770 or less each month, the monthly earnings test would provide access to full benefits. It is important that the beneficiary does not exceed $1,770 during any one month or the agency will add $80,000. As a result, he would lose a check for that month but not for other months when the benefits are below the monthly threshold of $1770.

If you retire during the year you reach full retirement age, the earnings test is applied only to the months prior to the month of your birthday. The higher threshold of $4,710 applies if the monthly test is used in 2023.

If you choose to work while claiming Social Security benefits, call the Social Security Administration with your estimated earnings so that your benefits are adjusted accordingly. If you choose not to inform them and they overpay you, they will withhold benefit checks until the overpayments have been cleared.