Retirees Who Work While on Social Security Face Financial Shock

It’s not a given that you’ll be ready to give up a paycheck from work completely once you claim Social Security. The reality is that the average monthly benefit today is only about $2,076, or roughly $25,000 per year.

Living on an annual income that low may not be feasible, even if you don’t have a lot of expenses. So you may need to supplement your Social Security benefits with other income. And if you don’t have much or any retirement savings, working part-time as a retiree may be your next best bet.

But the decision to work while collecting Social Security could have a huge impact on your monthly benefits. So it’s important to know the rules for people in that situation.

How the Social Security earnings test works

If you claim Social Security before reaching your full retirement age (FRA) and continue working, your benefits may be temporarily reduced based on how much you earn.

In 2026, you can earn up to $24,480 without risking withheld benefits. But beyond that level of earnings, you’ll have $1 in Social Security withheld for every $2 you earn.

If you’ll be reaching FRA this year, you can earn much more before benefits are withheld — $65,160. From there, you’ll have $1 in Social Security withheld for every $3 you earn.

Now it’s very important to keep these three points in mind:

• The earnings test does not apply to you if you’ve reached FRA. At that point, you can earn any amount of money without losing benefits.
• The earnings test limits change every year – typically for the better. Pay attention to what they look like so you know what options you have.
• Benefits that are withheld under the earnings test are not lost forever. You can expect to get the money back in the form of larger monthly checks once you reach FRA.

The latter is a point many people misunderstand, but it’s important to realize you’re not giving up benefits for good if you earn too much under the earnings test.

However, if you’re subject to the earnings test in the first place, it means you claimed Social Security before FRA. And that results in smaller monthly checks for life that won’t increase once you reach FRA (not accounting for annual cost-of-living adjustments).

Make sure you know the rules

Just because you’re collecting Social Security doesn’t mean you don’t need a job. And even if you don’t have a financial need to work, you may simply want to work because it’s a way to get out of the house and have some social interaction.

Social Security’s earnings test doesn’t necessarily have to be an impediment to working. But it’s very important to understand the rules.

Unfortunately, a lot of retirees don’t realize that earning too much before FRA results in withheld benefits. That puts people in a tough spot when their monthly income is suddenly lower than expected. But if you read up on how Social Security works and what the earnings test rules and limits entail, you can do a better job of planning and avoiding stress.

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