12 Income Sources That Won’t Reduce Your Social Security

12 Income Sources That Won’t Reduce Your Social Security Benefits

I understand how important Social Security benefits are to you and your loved ones. For many of us, these monthly payments provide essential financial support during our retirement years. The Social Security Administration delivers these benefits to millions of Americans, and it’s completely natural to worry about anything that might reduce these payments.

The good news is that while some types of income can indeed lower your Social Security benefits, many others won’t affect your payments at all. This knowledge can help you feel more secure as you plan your retirement finances.

Let’s walk through these income sources together, so you can feel confident about your financial future.

Income That Doesn’t Affect Your Social Security Benefits

Currently, the average monthly Social Security retirement benefit is about $1,976. Whether you receive more or less than this amount, I know you want to protect every dollar you’re entitled to.

Please keep in mind that while these income sources won’t reduce your benefit amount, they may still affect how your benefits are taxed through your modified adjusted gross income (MAGI). Let’s explore your options together.

1. Income Earned After Full Retirement Age

Once you reach your full retirement age (FRA), you can work as much as you want without any reduction in your Social Security benefits. This can be such a relief if you enjoy working or need additional income.

Your full retirement age depends on when you were born:

• 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

If you’re working before reaching your FRA, there are some limitations. However, once you reach that milestone, any benefits that were previously withheld will be returned to you, and your monthly benefit will increase to account for those withheld earnings.

2. Interest or Dividend Income

You’ll be pleased to know that the money your savings and investments earn for you won’t count against your Social Security benefits. This includes:

• Interest from savings accounts
• Earnings from money market accounts
• Income from certificates of deposit (CDs)
• Interest from bonds
• Dividend payments from stocks

This means you can continue growing your nest egg without worrying about reducing your Social Security benefits.

3. Pension Payments

If you’re fortunate enough to have a pension, I have reassuring news for you. Your pension payments won’t reduce your Social Security benefits.

Thanks to the Social Security Fairness Act, signed into law on January 5, 2025, even pensions based on work not covered by Social Security no longer reduce your benefits. This change has brought relief to many retirees who were previously affected by eligibility restrictions.

4. Unemployment Insurance Benefits

If you’re working during retirement and unfortunately lose your job, your unemployment benefits won’t affect your Social Security payments.

However, I should mention that in some states, your Social Security income might reduce your unemployment benefits. If you’re concerned about this, reaching out to your state’s unemployment office can provide clarity during a potentially stressful time.

5. Workers’ Compensation

If you’re receiving workers’ compensation for a job-related injury or illness, you can rest assured that these payments won’t reduce your Social Security retirement benefits.

However, if you’re receiving Social Security disability benefits (SSDI), workers’ compensation may reduce those payments if your combined benefits exceed 80% of your pre-injury earnings. The disability filing process includes reporting these additional income sources.

It’s worth noting that disability payments from private sources, like insurance policies you’ve purchased, won’t affect your Social Security disability benefits.

6. Retirement Account Withdrawals

When you withdraw money from your 401(k), 403(b), IRA, or other retirement accounts, these withdrawals won’t count as income for Social Security calculations.

However, withdrawals from traditional retirement accounts are taxed and may affect how your Social Security benefits are taxed. On the brighter side, distributions from Roth accounts aren’t taxed and don’t increase your MAGI.

7. Certain Third-Party Sick Pay

If you receive disability insurance payments through your employer when you’re unable to work, the timing matters:

• If you receive payments within six months after leaving work, they count as earned income for Social Security purposes.
• If you receive payments six or more months after leaving work, they’re considered unearned income and won’t affect your benefits.

This distinction can be important during periods of illness or disability.

8. Rental Property Income

For many retirees, rental income provides valuable supplemental income. Generally, the money you receive from renting property won’t count toward Social Security calculations.

There are just a few exceptions to be aware of:

• If you’re a real estate dealer receiving rental income as part of your business
• If you provide services primarily for the tenant’s convenience
• If you’re actively involved in managing farm commodities on land you rent out

Otherwise, your rental income is safe from Social Security reductions.

9. Lottery + Awards

If you’re fortunate enough to win the lottery or receive award money, these windfalls won’t count as earned income for Social Security purposes.

While you’ll still need to pay taxes on these windfalls, and they might increase your Medicare premiums, they won’t reduce your monthly Social Security check. This applies to contest winnings and achievement awards as well, unless you entered the contest as part of your business.

10. Royalties

If you’ve created intellectual property like books, music, or patents, the royalties you receive generally won’t count under the Social Security earnings test—as long as the property was created and copyrighted before the year you reach your full retirement age.

This can be particularly meaningful for creative individuals who continue to receive income from their past work.

11. Inheritances + Gifts

Receiving an inheritance or gift won’t affect your Social Security retirement benefits. These funds are considered unearned income and are excluded from Social Security calculations.

However, if you receive Supplemental Security Income (SSI), which is needs-based, inheritances and gifts may affect those benefits. SSI eligibility has stricter income and resource limits than regular Social Security benefits. It’s important to understand this distinction if you receive both types of support.

12. Jury Duty Pay

The small amount you receive for fulfilling your civic duty as a juror won’t count as wages for Social Security purposes. While jury duty pay isn’t substantial, it’s nice to know it won’t impact your benefits.

Remember, though, that jury duty income might still be taxable, and some employers may ask you to turn over your jury duty wages.

Understanding these income sources can help you plan your retirement with greater confidence. Everyone’s situation is unique, so if you have specific questions about your benefits, reaching out to the Social Security Administration directly can provide personalized guidance for your circumstances.