Millions of Retirees Could See Their Social Security Increase if This Bill Passes
A bicameral bill now working its way through Congress could fundamentally reshape how Social Security works for retirees who go back to work, and the stakes for millions of older Americans living on tight budgets are significant.
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For millions of older Americans, Social Security is the foundation of retirement income. Yet with the average retired worker now collecting about $2,086 per month as of July 2026, those monthly checks frequently fall short of what it takes to cover rising housing, healthcare, and everyday living costs. The gap is stark: the average basic cost of living for a senior citizen runs roughly $2,700 per month, leaving a deficit of about $7,400 per year for typical retirees who rely solely on their benefits.
That shortfall is one reason a growing number of retirees continue working after they begin collecting benefits. Some take part-time jobs to fill in the margins, while others return to full-time positions because the math simply does not work without additional income.
A February 2026 AARP survey found that 7% of retirees had reentered the labor force in the prior six months. Nearly half (48%) said their primary motivation was financial: they needed the money. Only 14% said they went back to work to stay active.
The financial pressure runs deeper than a single survey. The Schroders 2026 US Retirement Survey, conducted among 1,500 US investors including 382 retirees, found that 19% of retirees describe themselves as “struggling” financially and 49% say their retirement expenses are running higher than expected. A further 58% admit they do not know how long their savings will last. Those numbers make clear why supplemental work income has become a necessity for so many.
But retirees who claim Social Security before reaching their full retirement age (FRA) face an added complication when they try to return to work: the program’s retirement earnings test. A bicameral bill now before Congress seeks to eliminate it entirely.
How the earnings test works, and why critics want it gone
Social Security’s earnings test applies to recipients who have not yet reached FRA. In 2026, beneficiaries who are below FRA for the full year lose $1 in benefits for every $2 they earn above $24,480. For those who reach FRA during the year, a more generous threshold of $65,160 applies, with $1 withheld for every $3 earned above that limit in the months before their birthday month.
Those reductions are temporary, not permanent. Once a beneficiary reaches FRA, the Social Security Administration recalculates the benefit to account for the months of withholding and restores those funds. For retirees already stretched thin, however, absorbing reduced checks on a monthly basis, even temporarily, can cause genuine financial hardship.
Lawmakers on both sides of Capitol Hill introduced companion bills to eliminate the test. Senator Rick Scott introduced S.4184, the Senior Citizens’ Freedom to Work Act of 2026, in the Senate on March 24, 2026, with Senator Tommy Tuberville as a cosponsor. Representative Greg Murphy (R-N.C.) followed with H.R. 8344, the House companion bill, introduced on April 16, 2026. Scott announced the Senate proposal at a Senate Special Committee on Aging hearing focused on older Americans in the workforce, arguing that retirees who paid into Social Security throughout their careers should not face a financial penalty for choosing to keep working.
The earnings test has deep historical roots. It was first enacted during the Great Depression specifically to push older Americans out of the labor force and free up jobs for younger workers. Supporters of repeal argue that such Depression-era logic no longer belongs in a modern economy where experienced workers are in demand and rising costs have extended working years well beyond what earlier generations ever anticipated.
Critics of the current test also point to a transparency problem. Although the Social Security Administration eventually returns withheld benefits, many retirees do not fully understand how the adjustment works. As a result, they cut back on work unnecessarily or give up wages they could have earned without any permanent cost to their benefits.
Why supporters say this could be a game-changer
Backers of the legislation argue that the earnings test effectively penalizes work at a moment when the economy needs experienced workers and many retirees need additional income. Eliminating it would allow beneficiaries to accept more hours or return to full-time employment without having to track their wages against a federal threshold each year.
The proposal also carries a long-term argument for Social Security’s finances. Encouraging more older Americans to stay in the labor force means more payroll tax contributions flowing into the program, which depends heavily on that revenue to meet its scheduled benefit obligations. That point carries added urgency now: the 2027 COLA is currently projected at roughly 3.5% to 3.6%, which would be the largest annual adjustment since 2023, yet analysts note it may still leave many seniors unable to keep pace with their actual living costs.
As of early September 2026, both bills remain parked in committee with no floor vote scheduled in either chamber. The legislative path is long, but the proposal represents one of the most substantive efforts to modernize Social Security’s work rules in years, with sponsors on both sides of the Capitol.
Editor’s note: This update refreshes the average Social Security retirement benefit to $2,086 per month based on the SSA’s July 2026 Monthly Statistical Snapshot, adds context on the roughly $7,400 annual gap between the average benefit and average senior living costs, specifies H.R. 8344’s introduction date as April 16, 2026, and notes that as of September 2026 both bills remain in committee with no floor vote scheduled. The 2027 COLA projection of 3.5% to 3.6% from AARP and The Senior Citizens League was also added.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
