Social Security is a vital income stream for millions of Americans. So, as you can imagine, those Americans have a vested interest in receiving as high a benefit as possible.
The problem? Certain types of income can actually reduce your Social Security benefit.
If you work a job while you collect a Social Security check, for instance, your wages, bonuses, and commissions could result in reduced benefits.
The good news? Many types of income do not affect your Social Security benefits. And knowing about all of these exceptions can help you map out a strategy that provides the income you need while maximizing how much you receive from Social Security each month.
Read on, and I’ll outline these income sources.
Income That Doesn’t Affect Your Social Security Benefits
The monthly amount a retiree receives from Social Security varies by person. According to the Social Security Administration (SSA), the estimated average monthly Social Security retirement benefit in January 2025 was $1,976.
Of course, no matter how much you receive, you probably want to collect as much of it as you’re allowed. And one way of doing that is understanding which types of income won’t impact the size of your Social Security benefit.
Importantly: While these income sources won’t necessarily affect the size of the Social Security benefit you receive, they may affect your modified adjusted gross income (MAGI), which could affect how your Social Security benefits are taxed.
1. Income Earned After Full Retirement Age [While Collecting Benefits]
You can work and collect a full Social Security retirement benefit at the same time—but there are limitations. If you haven’t yet reached your full retirement age (FRA), earnings over a certain threshold will cause a temporary reduction in your benefits.
Your FRA depends on your birth year and the ages are as follows:
- Born between 1943 to 1954: 66
- Born in 1955: 66 and 2 months
- Born in 1956: 66 and 4 months
- Born in 1957: 66 and 6 months
- Born in 1958: 66 and 8 months
- Born in 1959: 66 and 10 months
- Born 1960 or later: 67
There are also special rules the year you reach your full retirement age. (Note: You can read about these special rules, thresholds, and more in our article about collecting Social Security while working.)
However, once you reach full retirement age, any excess withheld earnings will be refunded, and your monthly benefit will be recalculated upward to account for a return of all of your withheld earnings.
All of this said, if you earn income at any age before you start collecting benefits, it will factor into your benefit.
Related: When Should You Take Social Security?
2. Interest or Dividend Income
Interest is what a lender charges when someone borrows money. For instance, a bank might charge you interest when you take out an auto loan. But it works the other way—when you put your money into various financial products, you’re in effect lending money to a financial institution, and you receive interest in return. Some of those financial products include:
- Savings accounts
- Money market accounts
- Certificates of deposit (CDs)
- Bonds
Meanwhile, dividends are cash payments that a business makes to its shareholders. If you own shares of any dividend stocks (not all stocks pay dividends), then you receive dividend payments—often quarterly, but sometimes in different frequencies, such as monthly).
Neither interest income nor dividend payments are considered earnings for the purpose of calculating your Social Security benefits.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
3. Pension Payments
A pension is an employer-sponsored retirement plan in which the employer promises to pay a regular income to an employee after they retire.
Pensions have largely been replaced by 401(k)s (in which workers, not employers, are responsible for contributing), but if you’re one of the fortunate few that has a jobs with a pension, you might have wondered whether those payments will negatively affect your Social Security benefits.
Wonder no more: They won’t!
The SSA doesn’t count pension payments as earnings toward your earnings limit. Previously, some people’s benefits were reduced or eliminated if they had a pension based on work that was not covered by Social Security, but that is no longer the case following the passage of the Social Security Fairness Act, which was signed into law on Jan. 5, 2025.
Related: 10 Common Social Security Mistakes You Should Know
4. Unemployment Insurance Benefits
Many people simultaneously work and collect retirement Social Security benefits. But what happens if you lose your job and start collecting unemployment insurance benefits while you’re also collecting Social Security?
Partial good news there.
The SSA doesn’t count unemployment as earnings, and thus they won’t affect your retirement benefits.
However, Social Security income could reduce your unemployment insurance benefits, depending on your state. If you’re concerned about this possibility, contact your state’s unemployment office for more information.
Related: What Are Social Security Spousal Benefits [And How Do They Work]?
5. Workers’ Compensation
Workers’ compensation—state-level insurance that provides wages, medical care, and other benefits to those who have been injured or become ill as a result of their job—doesn’t reduce your Social Security retirement benefits.
But it does reduce your Social Security disability benefits (SSDI).
The SSA says it will reduce SSDI benefits, including those payable to family members, “if the combined total amount of your benefits and any workers’ compensation and public disability you get, exceeds 80% of your average earnings before you became injured or ill.”
That said, disability payments from private sources, such as insurance, won’t affect your Social Security disability benefits.
Related: How to Maximize Social Security Spousal Benefits
6. Retirement Account Withdrawals
If you pull money from a 401(k), 403(b), individual retirement account (IRA)—basically just about any type of tax-advantaged retirement plan—that won’t count toward your income for Social Security purposes.
That said, withdrawals from traditional tax-advantaged retirement plans are taxed, and they count toward your MAGI, which could affect how your Social Security benefits are taxed.
Meanwhile, distributions from any Roth accounts aren’t taxed, and they don’t increase your MAGI.
Related: Should You Tap Into Retirement Savings After a Layoff?
7. Certain Third-Party Sick Pay
If you have short- or long-term disability insurance through your employer, and you are temporarily unable to work, you may receive compensation from the insurance company or trust (referred to as “third-party sick pay”).
Because disability insurance pay is made in lieu of wages, if you receive it within six months after leaving a job, it will be considered earned income and count toward Social Security calculations.
However, if you receive third-party sick pay six months or more after work is discontinued, it will be categorized as unearned income and won’t count under Social Security’s earnings test.
Related: Should You Wait Until Age 70 to Claim Social Security?
8. Rental Property Income
Do you rent out a room or apartment? Or do you own commercial properties, such as stores or offices? In general, if you’re collecting rental property income, it’s excluded for purposes of Social Security calculations.
But there are three exceptions. Per the SSA, rental income must be included in calculating earnings if any one of the following is true:
- You received rental income in the course of your trade or business as a real estate dealer.
- Services were rendered primarily for the convenience of the occupant of the premises.
- You materially participated in the production or in the management of the production of farm commodities on land rented to someone else (applies to farm rental income).
Related: How to Invest for (And in) Retirement: Strategies + Investment Options
9. Lottery + Awards
Whether you hit the jackpot in a Vegas casino or a scratch-off lottery ticket finally came up big, you’re going to pay (probably hefty) taxes on those winnings, and that income could even raise your Medicare Part B premiums.
But on the bright side, the SSA doesn’t count lottery winnings as earned income.
If you receive payments from contests—achievement awards, length of service awards, hobbies, or prize winnings—those earnings also don’t count, unless you entered said contest as a trade or a business.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
10. Royalties
Royalties are money paid to a product or patent owner who gives permission for its use. While music is perhaps the most well-known type of royalty, you can get them for other reasons, such as writing a book, licensing out patents, or appearing on a TV show.
If you receive royalties during or after the year you turn your full retirement age (FRA), that income won’t count under the earnings test—as long as they come from property created and copyrighted or patented before the taxable year in which you reach FRA.
Also, royalties are only excluded from gross income for purposes of calculating Social Security benefits. They otherwise apply to gross income.
Related: Are You Retirement-Ready? 10 Questions to Ask Yourself
11. Inheritances + Gifts
An inheritance, which can be in the form of cash, a right, or a noncash item(s), is a death benefit. That money isn’t considered earned income, and it doesn’t affect your Social Security retirement benefits.
That said, it can affect Supplemental Security Income (SSI) benefits, as those are means-based.
Gifts are also considered unearned income and excluded from Social Security calculations, but also can affect SSI.
Related: How Long Will My Savings Last in Retirement? 4 Withdrawal Strategies
12. Jury Duty Pay
Jury duty income is not considered wages for Social Security purposes.
That’s not a huge deal—jurors are paid a pittance for fulfilling their civic responsibility—but every little bit counts.
That said, jury duty income might be taxable, and in some cases, employers might even request you to turn over some or all of your jury duty wages.
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