I’m planning to claim Social Security next year but the government says my income will force them to withhold more of the benefits – is that correct?

Social Security is a fairly flexible program in that it allows you to decide when you want to start taking benefits, provided you’re at least 62 years of age. The longer you wait (up until age 70), the larger a monthly benefit you can lock in. Filing sooner is always an option if waiting isn’t practical.

Social Security also allows people to work and earn money from a job while receiving benefits. Rules govern that arrangement, and sometimes those rules work against you in ways that are not immediately obvious.

That’s what seems to be happening to one reader who wrote in with a question. They’ll be reaching full retirement age (FRA) in March of 2026 and filed for Social Security in late 2025. Because they’re still working, they were told their income was too high in 2025 to receive any benefits. Now they’re being told they can’t receive benefits this year either, despite earning less and despite reaching FRA in a matter of months.

What the Social Security Administration (SSA) is doing is preemptively withholding payments based on outdated or estimated income data. The reader, understandably, wants to know what options are available.

How the Social Security earnings test works in 2026

Claiming Social Security prior to FRA while earning money from a job means you’re subject to an earnings-test limit. Exceeding that limit results in withheld benefits. A common misconception is that this money is gone for good, but these benefits are essentially deferred and paid back to you through higher monthly checks once FRA arrives.

The earnings-test limit changes annually. For 2026, the limits break down as follows:

• Under FRA all year: The limit is $24,480. Above this threshold, $1 in benefits is withheld per $2 of earnings.
• Reaching FRA in 2026: For the months leading up to your birthday, the limit is $65,160. Above that, $1 in Social Security is withheld per $3 of earnings.
• Month of FRA and beyond: There is no limit on earnings. You can earn any amount without affecting your benefit.

Congress is also weighing a more sweeping change. The Senior Citizens’ Freedom to Work Act of 2026 would repeal the retirement earnings test entirely. Sen. Rick Scott introduced the bill in the Senate at a March 2026 Senate Aging Committee hearing, and Rep. Greg Murphy is leading the companion legislation in the House. Sen. Tommy Tuberville is a Senate cosponsor. As of mid-2026, the bill remains in committee, but the bipartisan political energy behind it reflects growing pressure to overhaul the rule.

What counts as “earnings” under the test

Many early filers assume that all retirement income triggers the earnings penalty. The test, however, applies only to active income: W-2 wages and net earnings from self-employment. Passive income streams are excluded entirely. Capital gains, interest, dividends, pensions, traditional IRA or 401(k) distributions, and passive real estate income will not reduce your benefits. For self-employed workers, the SSA measures net income after expenses, not gross receipts, when applying the threshold.

One additional point worth flagging: if your Social Security payments are reduced because you earned over the limit, spouses and children receiving benefits on your work record will also see their payments reduced.

The special monthly rule for new retirees

The reader’s situation may be resolved through the First Year of Retirement rule. If you retire mid-year after already earning a high salary, the SSA can apply a monthly earnings test rather than an annual one. The specific monthly threshold depends on where you stand relative to FRA.

For someone under FRA for the entire year, the monthly limit is $2,040. Because the reader reaches FRA in March 2026, a more generous threshold applies to the months before that birthday: earning $5,430 or less in any of those months means the SSA considers that month a retirement month, and a full benefit check is payable regardless of total annual income. That distinction matters significantly. A worker who has already earned well above the annual limit in the first weeks of a year may still qualify for benefits in later months under the monthly test.

There is an additional wrinkle for those who move into freelance or consulting work during their first retirement year. Under the monthly rule, you cannot perform “substantial services” for your own business. The SSA measures this by time: dedicating more than 45 hours a month to your business (or between 15 and 45 hours in a highly skilled profession) can disqualify you from receiving your benefit check for that month, even when net profit for that period is zero.

What to do when the SSA makes a mistake

When the SSA makes a decision you disagree with, you have the right to request a reconsideration. You can find the form online and mail it in, but the fastest way to resolve an earnings estimate error is through your my Social Security account. Logging in and submitting Form SSA-561-U2 digitally lets you provide an accurate, updated estimate of your current income to stop automated withholdings. In many cases, updating your estimated 2026 earnings online can trigger the release of withheld checks without a formal appeal.

This is a step the reader should take promptly, especially since FRA arrives in March. At that point, income no longer affects benefit payments. For those born in 1959, FRA is 66 and 10 months. Those born in 1960 or later must wait until 67.

One piece of broader context worth knowing: the Social Security Fairness Act, signed into law on January 5, 2025, eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions had reduced or eliminated Social Security benefits for approximately 3.2 million public-sector workers, including teachers, police officers, and firefighters. By July 7, 2025, the SSA completed sending over 3.1 million retroactive payments totaling $17 billion to eligible beneficiaries, finishing the process five months ahead of schedule. Anyone in that group who is now filing should verify their benefit has been recalculated under the new rules before assuming the SSA’s current figure is accurate.

The reader is entitled to their previously withheld benefits. Because 2026 incorporates a 2.8% Cost-of-Living Adjustment (COLA), base benefit payouts and earnings thresholds are both higher than a year ago, making accurate income reporting even more critical. Once the SSA starts paying at FRA, it will automatically recalculate the monthly benefit to account for the months when checks were withheld, resulting in a higher permanent monthly payout. Acting promptly avoids unnecessary delays in getting that money flowing.

Editor’s note: This article was updated to clarify that the Social Security Fairness Act’s retroactive payment process involved over 3.1 million payments totaling $17 billion completed by July 7, 2025, per the SSA’s official announcement, and to add Sen. Tommy Tuberville as a Senate cosponsor of the Senior Citizens’ Freedom to Work Act of 2026.

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