Definition: The Retirement Earnings Test (RET) is a provision of the U.S. Social Security program that temporarily withholds some or all retirement benefits from beneficiaries who claim benefits before reaching Full Retirement Age (FRA) and continue to have earnings from employment or self-employment above a certain annual threshold.
How It Works
When a beneficiary is below FRA and subject to the RET, Social Security benefits are reduced by a fixed amount for each dollar earned above the applicable annual exempt amount. The specific reduction rate and exempt amount depend on the beneficiary's age and whether they will reach FRA during the current year.
- For beneficiaries below FRA for the entire year: In 2025, $1 in benefits is withheld for every $2 earned above the annual exempt amount ($23,400 in 2025).
- For beneficiaries who will reach FRA during the year: A different, more generous threshold applies for earnings in the months before reaching FRA. In 2025, $1 in benefits is withheld for every $3 earned above a higher exempt amount ($62,160 in 2025), and only earnings before the month FRA is attained count.
Key Features
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Benefits Are Not Lost, Only Delayed: Withheld benefits are not forfeited. Once the beneficiary reaches FRA, the Social Security Administration (SSA) recalculates the monthly benefit amount to credit the beneficiary for the months in which benefits were withheld. This results in a permanently higher monthly benefit for the remainder of the beneficiary's life.
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No RET After FRA: The Retirement Earnings Test ceases to apply once the beneficiary reaches Full Retirement Age. At that point, there is no limit on earnings, and benefits are paid in full regardless of work or income.
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Annual Adjustment: The exempt amounts are adjusted annually based on growth in average wages.
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Only Earned Income Counts: The RET applies only to wages from employment and net earnings from self-employment. It does not apply to income from pensions, investments, retirement accounts, capital gains, or other unearned income.
Purpose and Rationale
The RET is designed to ensure that Social Security retirement benefits serve their original purpose: replacing lost earnings due to retirement. The program was not intended to function as a universal pension payable regardless of work activity. By temporarily withholding benefits from those who continue to earn significant income while receiving early benefits, the RET helps preserve the program's financial sustainability and targets benefits toward those who have fully or substantially retired.
Criticism and Policy Debate
The RET has been criticized for discouraging work among older Americans and creating a "tax" on earnings that can be confusing to beneficiaries. Some policy analysts and lawmakers have proposed eliminating or modifying the test, arguing that it disincentivizes labor force participation among older workers. Others defend the RET as a necessary feature that protects the Social Security Trust Funds and maintains the program's insurance-based logic.
Sources: Social Security Administration, "Program Explainer: Retirement Earnings Test" (ssa.gov); Congressional Research Service reports; Bipartisan Policy Center explainers.
