Social Security’s $1-for-$2 Penalty: How Working a Part-Time Job Can Backfire
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There’s a reason a lot of older Americans opt to claim Social Security early rather than wait until full retirement age (FRA), which is 67 for those born in 1960 or later: They’re ready to stop working and need income from Social Security to make that happen.
Social Security benefits can be claimed starting at age 62. Filing for benefits ahead of FRA will shrink them permanently in the process. But for some people, that hit is worth it if it means an early workforce exit.
There’s a big difference between working part-time in your 60s and working full-time, though. A full-time schedule may be too much for you, and it may take you away from doing the things you love.
A part-time work schedule might offer you the best of both worlds. It could be your ticket to earning a decent chunk of money and staying just busy enough without feeling overwhelmed or constantly pressed for time.
But if you’re going to work part-time while collecting Social Security, you’ll need to be mindful of the program’s rules. That’s because earning too much money in that situation could result in the temporary loss of part — or in some cases, all — of your monthly Social Security check.
Understanding Social Security’s earnings test
Social Security’s earnings test applies to recipients who are getting benefits prior to FRA. While this is something that’s allowed, if your earnings exceed a certain limit, you risk having benefits withheld temporarily.
That limit changes yearly. In 2026, it’s $24,480 for people who won’t reach FRA by Dec. 31.
If you earn more than $24,480 this year in that situation, you’ll have $1 in Social Security withheld per $2 of income. What this also means is that if you have a very lucrative part-time job, it’s conceivable that you could lose your entire Social Security check.
That said, Social Security benefits that are withheld for exceeding the earnings test limit are not forfeited. Once FRA arrives, your benefits should increase to make up for those withheld payments. But it’s important to understand what the impact on your finances might look like in the near term.
Think twice about an early claim if you know you’ll keep working
If you’re certain you’re going to work part-time after resigning from full-time work, you may want to hold off on claiming Social Security if there’s a good chance your earnings will cause you to have benefits withheld. And there’s a big reason why.
Filing for Social Security ahead of FRA shrinks your benefits off the bat. That’s not a temporary reduction, but rather, a permanent one. And if you’re then going to earn so much money that you’re losing some of your benefits, there’s little sense in accepting a reduced amount for life.
So if you expect to earn a decent sum of money working part-time, instead of claiming Social Security right away if you haven’t reached FRA, what you may want to do instead is reduce your spending and see if you can get by on your part-time paycheck and withdrawals from savings for a few years.
Holding out until FRA to claim Social Security means you won’t face a reduction in benefits at all, and you also won’t be subject to the program’s earnings test if you continue to work in any capacity. So that’s really a double win.
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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, The Washington Post, 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.
