Thinking of Collecting Social Security Early? Not So Fast.


































Episode 342 - Thinking of collecting your Social Security at age 62? Watch out for the “Excess Earnings Test.” It’s a bit more complicated than you may realize.













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Transcript of Podcast Episode 342





Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, thinking of collecting Social Security early? Not so fast.
So, you have the option of starting to collect your Social Security as early as age 62 (age 60 if you’re a surviving spouse), or as late as age 70. For most of us, Full Retirement Age is age 67. That’s when you can collect your full, unreduced benefit. If you collect earlier than your Full Retirement Age your benefit is reduced. The longer you wait, the more money you’ll get every month. So, what do most people do?
Well, the most popular choice is to begin collecting at age 62.[1] Always has been. But beware: there’s a trap lurking that you need be aware of. It’s called the “Excess Earnings Test.” For many people, the Excess Earnings Test effectively limits your choices. You can collect early if you want to—say age 62, 63 or 64—or you can continue working. But if you make a good income from your job, you can’t do both.
Here's how the Excess Earnings Test works. If you’re still working and making good money, the government would prefer that you wait until Full Retirement Age before you start collecting your Social Security. So, they give you a disincentive if you start early.
For example, let’s say you file at age 62. In that calendar year, your wages in excess of the earnings limit ($23,400 for 2025) will cause a benefit reduction of $1 for every $2 you go over the limit.[2] Note that the limit is indexed annually.
Is it possible to completely eliminate your Social Security benefit in a given year? Sure. Let’s say you want to start collecting in January, but you continue to work. Let’s also assume that your reduced age 62 benefit is $2,000 per month. If you do the math, that means that if you earn more than $71,400 in wages, your benefit will be reduced all the way to zero.
The limit is not quite so onerous in the calendar year you reach Full Retirement Age. For 2025, that benefit reduction is $1 for every $3, and the earnings limit is $62,160.[3] If you turn 67 this year, that more generous limit will apply.
Also note that they use a monthly test (rather than an annual test) in the calendar year you first apply. In 2025, the monthly amount works out to $1,950 per month, or $23,400 divided by twelve. This is important because let’s say you retire in June. You might have made a lot of money in the first half of the year, but that’s irrelevant if you start collecting in July after you’ve stopped working.  In that scenario, there’s no need to worry about the Excess Earnings Test.