Two Surprising Benefits and One Big Downside of Working While on Social Security

Working while collecting Social Security is perfectly legal, and plenty of retirees do it. The arrangement can be genuinely rewarding, but it comes with one important catch that trips up a surprising number of people. Understanding both sides of the equation before you take a job can save you from an unwelcome surprise in your monthly check.

The upside of working while on Social Security

Two real advantages make this arrangement worth considering. The first is straightforward: extra income. According to the Social Security Administration, the average retirement benefit ran about $2,086 per month as of mid-2026, which works out to roughly $25,000 a year. A 2.8% cost-of-living adjustment took effect in January 2026, but even with that bump, the monthly payment leaves little margin for error. Retirees who still carry a mortgage, face high prescription costs, or want to preserve their savings will find that a modest paycheck goes a long way toward filling that gap.

The second advantage is less obvious: working after you claim benefits can actually increase your future monthly payments. The SSA calculates your retirement benefit using your 35 highest-earning years. If your work history is shorter than 35 years, the agency plugs a zero into the formula for each missing year, pulling your benefit down. Earning even a modest wage in retirement can displace one of those zero years and nudge your monthly check higher going forward. Once the SSA detects new wages on your record, it automatically recalculates your benefit to reflect the improvement.

The downside of working while on Social Security

The potential downside kicks in only for people who have not yet reached full retirement age (FRA). For anyone born in 1959, FRA is 66 and 10 months. For anyone born in 1960 or later, it is 67. If you claim benefits before reaching that milestone and continue to work, the SSA applies what it calls the Retirement Earnings Test, and earning above the annual threshold can cause benefits to be temporarily withheld.

The 2026 limits work as follows. If you will be under FRA for the entire year, the SSA withholds $1 in benefits for every $2 you earn above $24,480. If you will reach FRA at some point during 2026, a more generous threshold applies: $1 is withheld for every $3 you earn above $65,160, and only the wages you earn before your birthday month count toward that test. Those limits rose from $23,400 and $62,160 in 2025, continuing a pattern of annual increases tied to wage growth.

One common misconception is that withheld benefits are lost permanently. They are not. Once you reach FRA, the SSA recalculates your benefit upward to credit back the months that were withheld, and you receive that money as a permanently larger monthly payment going forward. The trade-off is that your checks can shrink in the near term, which matters a great deal if you are counting on that income month to month.

The practical takeaway is simple. If you are under FRA and want to avoid any reduction in benefits, keep your earned income below the applicable threshold. Because the earnings test disappears entirely at FRA, the restriction is temporary for everyone. And because both limits tend to rise each year, the window for working without penalty generally widens over time. Early projections suggest a 2027 COLA in the range of 3.5%, which would push the earnings test thresholds higher again in January.

One longer-range factor worth knowing: the Social Security Trustees projected in their June 2025 report that the program’s combined trust funds could be depleted by 2033. A depletion would not mean benefits disappear, but it could trigger an automatic benefit reduction unless Congress acts. That uncertainty adds one more reason to think carefully about when to claim, how much you want to rely on Social Security alone, and whether supplemental income from work makes sense for your situation.

Editor’s note: This article updates the average Social Security retirement benefit to approximately $2,086 per month (mid-2026 SSA data), clarifies full retirement age by birth year, adds the 2025 earnings test thresholds for comparison, and incorporates the SSA Trustees’ 2033 trust fund depletion projection and early 2027 COLA forecasts as context for readers planning ahead.

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