If you’re collecting Social Security and are still working, one number could have a big impact on your retirement income — $24,480. That’s the annual earnings limit that applies in 2026 to Social Security recipients who are younger than their full retirement age (FRA) for the entire year.
Earn more than that, and expect the Social Security Administration to temporarily withhold part of your benefits (or in some cases, your entire check).
For many retirees, Social Security’s earnings test creates a frustrating dilemma. Continuing to work could help you pay the bills and delay withdrawals from your retirement savings. But earning too much could easily reduce the Social Security checks you’re counting on today.
The good news is that some lawmakers are fighting to do away with Social Security’s earning test. If they’re successful, working while collecting benefits could become a lot easier.
Why the earnings test exists
The Social Security earnings test has been part of the program for decades. Its purpose is to limit benefits for people who claim Social Security before reaching FRA while continuing to earn substantial wages.
Under the current rules, if you’re below FRA for the entire year, you can earn up to $24,480 without negatively affecting your benefits. If you earn more than that, Social Security will withhold $1 in benefits for every $2 you earn above the limit. The earnings limit is also higher if you’ll reach FRA before the end of the year.
Once you reach FRA, there’s no more earnings limit to worry about. You can bring home a $400,000 salary and still get your Social Security checks without having benefits withheld.
Supporters of the earnings test argue that it helps preserve Social Security’s finances by reducing payments to people who continue earning significant incomes before reaching FRA.
It’s also worth noting that benefits lost through the earnings test aren’t gone forever. At FRA, the Social Security Administration recalculates your benefits to give you credit for funds that were previously withheld.
Still, critics say the rule discourages older Americans from staying in the workforce. That’s a big reason lawmakers have introduced the Senior Citizens’ Freedom to Work Act, legislation that would eliminate the Social Security earnings test.
Supporters argue that retirees shouldn’t be penalized for working while collecting benefits, particularly when many are doing so simply to keep up with rising living costs.
Getting rid of the earnings test could benefit Social Security and retirees alike
The earnings test actually hurts Social Security in a way. By making it less appealing to work, some seniors may forgo part-time wages. But that denies Social Security payroll tax revenue, which it needs to stay afloat. Getting rid of the earnings test eliminates that problem.
Plus, doing away with the earnings test could allow many seniors to supplement their monthly benefits without being penalized.
For now, though, the earnings test remains in effect. So if you’re planning to work while collecting Social Security before reaching your FRA, it’s important to understand how the rules apply to you. The earnings test limits are adjusted annually, and the thresholds tend to increase from one year to the next.
Before accepting extra hours at a part-time job, joining the gig economy, or launching a small business in retirement, know what the earnings test limit is. That could help you better strategize on how much income to aim for.
Of course, even with good planning, you may end up having some of your Social Security benefits withheld. But that doesn’t have to be a terrible thing, provided you know to expect it and are able to plan around it.
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