Claim Social Security before your full retirement age and keep working, and Social Security holds back $1 of your benefit for every $2 you earn above an annual limit. That's the earnings test, and it catches people who filed at 62 planning to work part time and then found the checks stopped arriving.
The limit is set each year and moves with average wages. It has been in the low twenty-thousands in recent years and it steps up most Januaries, so look up the current figure rather than trusting one you read somewhere. What matters more is how the arithmetic runs. Say the limit is $23,000 and you earn $33,000. You're $10,000 over, so they withhold $5,000, which is half the overage. If your benefit is $1,500 a month, that's three and a third months of checks. They don't shave a little off each month either. They stop paying entirely until the withholding is covered, then start again.
The year you reach full retirement age has its own version and it's gentler. In that year the limit is much higher, the ratio is $1 held for every $3 over, and only what you earn in the months before your birthday month counts. Starting the month you hit full retirement age, the test is gone completely. You can earn a million dollars and the check doesn't move.
Earned income means wages and self-employment income. It does not mean pension payments, IRA or 401(k) withdrawals, dividends, interest, rental income, or capital gains. A retiree living on portfolio withdrawals and a pension earns nothing under this test no matter how large the withdrawals are.
The withheld money isn't gone. When you reach full retirement age, Social Security recalculates your benefit and credits you for the months they withheld, and your monthly check goes up from that point forward. Live long enough and you get all of it back. Die at 68 and you don't. So the earnings test works more like a delay than a penalty, and it's a delay you feel in the checking account right now while the repayment shows up years later.
There's a special monthly rule for the first year you retire. If you retire mid-year and have already blown past the annual limit between January and June, Social Security can apply a monthly test instead, so any month you earn under a monthly threshold and aren't running a business counts as a retirement month and gets paid. You have to tell them you're retiring for that to apply. They don't go looking.
Two practical notes. If you're self-employed they look at hours, not just dollars, because an owner can pay themselves whatever they want. Forty-five hours a month in your own business can count as substantial services even when the paycheck is small. And if a bonus or a commission from a prior year lands after you claim, tell Social Security, because money earned before you claimed generally doesn't count against you and their system won't know that on its own.
If you're 62 and still working full time, run your own numbers before you pick a filing date. Compare what the earnings test would hold back against what waiting does to the benefit itself, and claiming Social Security at 62, 67, or 70 covers what the waiting buys before work is even in the picture. Then call Social Security and ask them to run your estimate using your actual expected wages. They'll do it, and it takes one phone call.