Retirement Paycheck Warning: Why Some Over 65 Might See Reduced Social Security

Retirement planning involves more than just stopping work; it requires careful financial management to ensure long-term stability. Social Security benefits play a crucial role in retirement income, but understanding the rules governing these benefits is essential to avoid potential reductions and maximize payments.

Working After Retirement: How Earnings Affect Benefits

Many retirees choose to continue working even after reaching retirement age. While this is allowed, Social Security Administration (SSA) regulations impose limits on earnings before reducing benefits. The impact of earnings depends on whether a retiree has reached their full retirement age (FRA):

• Before full retirement age: Benefits are reduced by $1 for every $2 earned above the annual limit. In 2025, this limit is $23,400.
• In the year of reaching full retirement age: Benefits are reduced by $1 for every $3 earned above a higher limit, which in 2025 is $62,160. However, only earnings before reaching FRA are counted.
• After reaching full retirement age: Earnings no longer reduce benefits, regardless of income.

Importantly, once a retiree reaches FRA, the SSA recalculates benefits to compensate for months when payments were reduced due to excess earnings.

How to Qualify for the Maximum Social Security Pension

The amount of Social Security benefits a retiree receives is determined by their earnings history and the age at which they claim benefits. To maximize the monthly pension, retirees should consider the following factors:

• Work for at least 35 years: The SSA calculates benefits based on a retiree’s highest 35 years of earnings. Having fewer than 35 years of work results in lower payments since years with no earnings count as zero.
• Earn a higher income during working years: Social Security benefits are based on lifetime earnings. Higher earnings lead to higher benefits, but only up to the annual taxable maximum, which changes each year.
• Delay claiming benefits: Although retirees can start collecting Social Security at age 62, doing so results in permanently reduced payments. Waiting until full retirement age—or even delaying until age 70—can significantly increase monthly payments due to delayed retirement credits.

Each year of delayed claiming beyond FRA increases benefits by approximately 8% until age 70. This strategy helps retirees receive the highest possible Social Security pension.

Deducting Earnings from Benefits: A Legal Option

Some retirees may have the opportunity to adjust their Social Security benefits to increase their monthly payments. The SSA periodically recalculates benefits based on the earnings reported in previous years.

If a retiree had higher earnings in a recent year than in a previous one used in their benefits calculation, the SSA updates the amount and applies any increases retroactively to January of the following year.

Additionally, those who previously had benefits reduced due to excess earnings will have their payments recalculated at full retirement age, allowing them to recover part of the withheld amounts.