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. You’re also allowed to file sooner if you don’t want to wait on your money.
Social Security also allows people to work and earn money from a job while receiving benefits. But there are rules to follow in that regard. And sometimes, those rules can work against you.
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 get 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What the Social Security Administration (SSA) is doing is preemptively withholding payments based on outdated or estimated income data.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 they can do about it.
How the Social Security earnings test works in 2026
When you claim Social Security prior to FRA and make money from a job, 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 are as follows:
- Under FRA all year: The limit is $24,480. After this, $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. From there, $1 in Social Security is withheld per $3 of earnings.
- Month of FRA and beyond: There is no limit on earnings.
What counts as “earnings” under the test
Many early filers assume that all retirement income triggers the annual earnings penalty. The earnings test, however, applies only to active income: W-2 wages and net earnings from self-employment. Passive income streams do not count toward the test at all. 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, note that the SSA measures your net income, not gross receipts, when applying the threshold.
It’s also worth knowing that if your Social Security payments are reduced because you earned over the limit, spouses and children receiving benefits on your work record will have their payments reduced as well.
The special monthly rule for new retirees
The reader’s situation may be resolved by the First Year of Retirement rule. If you retire mid-year after already earning a high salary, the SSA can apply a monthly limit rather than an annual one. In 2026, earning $2,040 or less in any given month after retiring entitles you to a full benefit check for that month, regardless of total yearly income.
There is an additional wrinkle for those who move into freelance work or consulting during their first retirement year. Under the monthly rule, you cannot perform “substantial services” for your own business. The SSA gauges 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 if your 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 still 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 they’ll be reaching FRA in March. At that point, income no longer affects benefit payments one bit. 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 noting: the Social Security Fairness Act, signed into law on January 5, 2025, eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These rules had reduced or eliminated Social Security benefits for roughly 3 million public-sector retirees, including many teachers, police officers, and firefighters. Anyone in that group who is now filing should verify that their benefit has been recalculated under the new rules before assuming the SSA’s current figure is accurate.
The good news for the reader is that they are entitled to their previously withheld benefits. Because 2026 incorporates a 2.8% Cost-of-Living Adjustment (COLA), base benefit payouts and 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 now avoids waiting longer than necessary to get that money flowing.
Editor’s note: This article was updated to add context about the Social Security Fairness Act’s elimination of the WEP and GPO provisions, which took effect for benefits payable January 2024 and affected roughly 3 million public-sector retirees. The 2026 COLA figure was confirmed at 2.8% per the SSA’s official fact sheet, and the earnings-test limits of $24,480 and $65,160 were verified against current SSA data.
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