In the U.S., retirement is not always synonymous with complete disengagement from work. The increase in the cost of living, better health at older age and the wish to be active are among the reasons that have led millions of elderly people to look for new ways to make money in addition to their Social Security benefits. As a result, many people have now started to work part-time, do consultancy or freelance jobs as their main source of income, or as one of their income sources. Certainly this extra income is very helpful, but it can also—unfortunately—sometimes activate the Social Security Earnings Test, which can lead to a person’s monthly Social Security being reduced temporarily if they have not reached their Full Retirement Age (FRA) yet.
But there is a silver lining in this situation—the income limits will be gradually increased starting in 2026, which means the retirees will get financial relief and the flexibility to work. The existing rules, 2026 changes, and planning will be our focus in this article.
Current Rules (Status Applicable in 2025)
In the case that you have attained your Full Retirement Age (FRA), the limit for your income is non-existent—the full amount of your Social Security benefits will still be paid to you. However, if you are still below FRA and are employed, the Social Security Administration (SSA) determines a specific Earnings Limit for each year. In the event that your earnings surpass that limit, a portion of your benefit will be held back.
Current rules for 2025 are as follows:
| Status | 2025 Earnings Limit | Reduction Rule |
|---|---|---|
| If you won’t reach full retirement age in 2025 | $23,400 | $1 will be withheld for every $2 above the limit. |
| If you reach FRA in 2025 | $62,160 | $1 will be withheld for every $3 above the limit. |
It’s very important to remember that withheld benefits are not permanently lost. When you reach your full retirement age, the SSA recalculates and increases your monthly amount to adjust for the amount previously withheld.
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What’s Going to Change in 2026
The earnings test is not eliminated, but there will be a hike in the income limits. It is done yearly to consider the inflation and increase in wages. The newly set limits are usually made public by the SSA in October every year.
The projected limits for 2026 will be as follows:
| Status | 2026 Projected Limits | Changes from 2025 |
|---|---|---|
| If you remain below FRA for all of 2026 | $24,360 | +$960 increase |
| If you reach FRA in 2026 | $64,800 | +$2,640 increase |
This change means that retired individuals can now earn a little more by working part-time or consulting without worrying about their Social Security benefits being reduced significantly.
How this deduction works in real life
The SSA doesn’t deduct your benefits with each paycheck. Instead, they determine how much to withhold in advance based on your projected earnings for the entire year.
As an example:
Let’s say you’re 64 in 2026 and expect to earn $30,000.
The estimated limit for 2026 is $24,360—meaning you earned $5,640 more.
The SSA’s rule is: $1 will be withheld for every $2 of additional income.
So, half of $5,640, or approximately $2,820, will be temporarily withheld from your Social Security.
This may result in one or two of your initial Social Security checks being withheld. But when you reach FRA, the SSA recalculates your monthly amount and increases it to gradually restore the withheld amount.
Why These Rules Are Made
The earnings test was created to prevent the Social Security system from becoming unbalanced. Its main aim is to prevent workers who choose to take their Social Security benefits earlier but still keep on working from receiving a higher total benefit than non-working retirees who take all their benefits later.
This structure is crucial for social justice and financial soundness as it allows the grant of benefits to all persons based on their age and conditions rather than on mere randomness.
How to Plan for 2026
If you want to continue receiving Social Security benefits in the coming years, it’s helpful to take some precautions and planning steps:
- Establish your projected income at the beginning of the year.
- This will help you estimate how close to or above the income limit you are.
- Report changes in your income to the SSA in a timely manner.
- This can help avoid excessive deductions or overwithholding.
- If possible, defer receiving benefits for a period of time.
- The later you start taking benefits, the greater your monthly amount will be.
- Keep track of your full retirement age (FRA).
- There are no restrictions on the amount of income you can earn once you reach FRA.
This allows you to track your benefits, deductions, and monthly updates.
Full Retirement Age (FRA) Table
| Birth Year | Full Retirement Age |
|---|---|
| 1954 or earlier | 66 years |
| 1955 | 66 years + 2 months |
| 1956 | 66 years + 4 months |
| 1957 | 66 years + 6 months |
| 1958 | 66 years + 8 months |
| 1959 | 66 years + 10 months |
| 1960 or later | 67 years |
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Conclusion
Being active and financially stable post-retirement has turned out to be a requirement for most Americans today. The Social Security Earnings Test system is somewhat complicated, yet it allows the retirees to essentially vary their paychecks and pensions depending on the situation at hand.
The rise of income thresholds in 2026 will free older people from the need to worry about excessive taxes and they will be able to use the extra cash for their necessities. Retirement, with the right planning and being well-informed, can not only be a period of luxury but also an opportunity to secure and maintain a balanced lifestyle.
FAQs
Q1. What is the Social Security earnings test?
It’s a rule that temporarily reduces your Social Security benefits if you earn above a certain limit before reaching full retirement age (FRA).
Q2. Will the earnings limits change in 2026?
Yes. The limits are projected to increase to $24,360 for those under FRA and $64,800 for those reaching FRA in 2026.
Q3. Are withheld benefits lost forever?
No. Once you reach full retirement age, your benefits are recalculated and increased to repay what was withheld earlier.
Q4. How can I avoid having too much withheld?
Estimate your annual income early and report any changes to the Social Security Administration to keep payments accurate.
Q5. Can I work freely after reaching full retirement age?
Yes. Once you reach FRA, you can earn any amount without any reduction in your Social Security benefits.