The $24,480 Social Security Rule That Could Cost Retirees Thousands

A lot of people decide that once they retire, they are done working for good. That is understandable. But there are plenty of good reasons to work in retirement.

For one thing, the extra income might come in handy. If you missed the boat on retirement savings and are living mostly on Social Security, you may be struggling to keep up with your costs. A part-time paycheck can help cover those gaps without drawing down savings any faster.

Even if money is not a problem, a part-time job provides structure and daily routine. If you were used to socializing at work and miss that aspect, staying connected to a workplace can be rewarding for its own sake.

The good news is that you are allowed to work while collecting Social Security. But there is a $24,480 rule you should know about first.

When you work while receiving Social Security

The Social Security Administration (SSA) does not prohibit beneficiaries from holding down a job. Once you reach full retirement age (FRA), you can earn any amount of money without having benefits withheld. A $200,000 salary would not reduce your monthly Social Security check by a single dollar once you have crossed that age threshold.

Keep in mind, though, that you can claim Social Security as early as age 62. If you decide to work while collecting benefits before reaching FRA, you will be subject to what the SSA formally calls the retirement earnings test.

If you are under full retirement age for the entire year, the SSA deducts $1 from your benefit payments for every $2 you earn above the annual limit. For 2026, that limit is $24,480. A recipient earning $34,480, for example, would see $5,000 withheld from their annual benefits, a meaningful bite out of any monthly budget that relies on both a paycheck and a Social Security check.

One practical wrinkle worth knowing: the SSA typically does not spread that reduction evenly across the year. Instead, it withholds entire monthly checks until the total amount owed is recovered. If you were counting on a check arriving in January and February, you may not see one. That can be a real cash-flow shock even when the math looks manageable on paper.

One important nuance when figuring out how much to deduct: the SSA counts only wages from a job or net profit from self-employment. Bonuses, commissions, and vacation pay are all included. Pensions, annuities, investment income, interest, veterans benefits, and other government or military retirement benefits are not counted. Retirees drawing income from a 401(k) or brokerage account have nothing to worry about from the earnings test.

That money withheld before FRA is not gone for good. Once you reach FRA, the SSA recalculates your monthly benefit to account for those previously withheld amounts, resulting in a higher monthly payment that continues for the rest of your life. Still, losing checks in the near term can sting, particularly if you were counting on both Social Security and wages to cover monthly expenses.

The numbers look different for some retirees

The $24,480 limit applies only to Social Security recipients who will not reach FRA at any point during the year. For those who will hit FRA before December 31, the rules shift considerably in their favor.

In the year you reach full retirement age, the SSA deducts $1 in benefits for every $3 you earn above a different, higher limit. In 2026, that limit is $65,160. Critically, the SSA counts only your earnings up to the month before you reach FRA, not your earnings for the entire calendar year. If you turn your FRA age in November, only January through October earnings count against the $65,160 threshold. Everything you earn in November and December is completely exempt.

Both thresholds rise each year alongside national average wage growth. The 2026 limit for those under FRA all year is up $1,080 from the 2025 figure of $23,400, while the limit for those reaching FRA in 2026 rose $3,000 from $62,160 in 2025.

A push to change the rules

Critics have long argued that the retirement earnings test discourages older Americans from staying in the workforce, and that pressure has recently gained traction on Capitol Hill. Rep. Greg Murphy (R-NC) introduced the Senior Citizens’ Freedom to Work Act in the House in April 2026, and Sen. Rick Scott (R-FL), chair of the Senate Special Committee on Aging, introduced a companion bill in the Senate in March 2026. Sen. Tommy Tuberville (R-AL) is a cosponsor. The bill would repeal the retirement earnings test entirely, allowing seniors to earn any amount from work without facing a reduction in their Social Security checks.

The backdrop is a workforce that is skewing older. According to the U.S. Census Bureau, workers age 55 and older have been the fastest-growing age group in the labor force for more than two decades, representing 24% of the U.S. workforce in 2022, up from just 10% in 1994. As of mid-2026, the Senior Citizens’ Freedom to Work Act had been referred to committee and no floor vote had been scheduled.

Make sure you know the rules

For now, the earnings test remains on the books and applies to any Social Security recipient who claims before FRA while continuing to work. The core question to ask before filing early is straightforward: do you intend to keep working? If so, you need to be mindful of how much you earn and how your wages could reduce your monthly benefit payments, and potentially eliminate a check entirely for some months.

You may also want to consider waiting until FRA to file for benefits. Doing so lets you avoid the earnings test entirely, collect your full benefit from day one, and earn as much as you want from work with zero impact on your monthly check.

Editor’s note: This article was updated to add that Sen. Tommy Tuberville is a cosponsor of the Senior Citizens’ Freedom to Work Act, to note that the SSA withholds entire monthly checks rather than reducing each payment proportionally, and to include U.S. Census Bureau data showing workers 55 and older made up 24% of the U.S. workforce in 2022, up from 10% in 1994.

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