Still Working? How the Social Security Earnings Test Affects Your Benefits (2026)

You can start collecting Social Security as early as age 62, but if you're still earning income from work, the Social Security Administration might reduce or completely withhold your benefits until you reach Full Retirement Age (67).

This "earnings test" trips up thousands of Americans every year. Some people claim early only to discover they'll receive little or nothing due to their work income. Others avoid claiming when they actually could receive benefits without penalty.

Understanding exactly how the earnings test works-and what income counts-is crucial for making the right claiming decision if you're still working or planning to work after you start collecting benefits.

Quick Summary

If you earn over $22,320/year (2026 limit) and claim before age 67, Social Security reduces your benefits by $1 for every $2 you earn over the limit.

• Under the limit: No reduction in benefits
• Over the limit: Benefits reduced or eliminated
• At Full Retirement Age (67): Earnings test disappears completely

Calculate how the earnings test affects YOUR situation

What Is the Social Security Earnings Test?

The earnings test is a rule that temporarily reduces your Social Security benefits if you claim before Full Retirement Age (67) while earning income from work above certain annual limits.

Key points:

• Only applies if you claim benefits BEFORE age 67
• Only applies to income from WORK (wages and self-employment)
• Benefits are withheld, not permanently lost (you get credit later)
• Completely disappears when you reach Full Retirement Age

Why does this rule exist? Social Security was designed as retirement income. The earnings test ensures you're not "double-dipping" by collecting full retirement benefits while still earning substantial work income.

2026 Earnings Test Limits and Penalties

If You're Under Full Retirement Age All Year

2026 Annual Limit: $22,320

Penalty: $1 in benefits withheld for every $2 you earn over the limit

Example 1: Moderate overage

• You claim at 62: $1,800/month benefit ($21,600/year)
• You earn $35,000/year from work
• Over the limit by: $35,000 - $22,320 = $12,680
• Annual penalty: $12,680 ÷ 2 = $6,340
• Monthly penalty: $6,340 ÷ 12 = $528/month withheld
• You receive: $1,800 - $528 = $1,272/month

Example 2: Large overage

• You claim at 63: $1,900/month benefit ($22,800/year)
• You earn $70,000/year from work
• Over the limit by: $70,000 - $22,320 = $47,680
• Annual penalty: $47,680 ÷ 2 = $23,840
• You receive: $0/month (entire benefit withheld)

In the Year You Reach Full Retirement Age

2026 Higher Limit: $59,520 (for months BEFORE you reach FRA)

Reduced Penalty: $1 in benefits withheld for every $3 you earn over the limit

Example:

• You turn 67 in July 2026
• January-June earnings: $40,000
• Over the limit by: $40,000 - $29,760 (half of $59,520) = $10,240
• Penalty: $10,240 ÷ 3 = $3,413
• Only your benefits from January-June are affected

Important: Starting the month you reach Full Retirement Age, the earnings test disappears completely, no matter how much you earn.

What Counts as "Earnings" for the Test?

DOES Count (Reduces Benefits)

Wages from employment:

• Salary, hourly wages, tips, commissions
• Bonuses and overtime pay
• Income from your own business (net self-employment earnings)

Self-employment income:

• Net profit from business or freelance work
• Income from consulting or contracting
• Rental income from real estate business (if you actively manage it)

Does NOT Count (No Impact on Benefits)

Investment and retirement income:

• Interest and dividends
• Capital gains from selling stocks/bonds
• IRA and 401(k) withdrawals
• Pension payments
• Annuity payments

Passive rental income:

• Rent from properties you don't actively manage
• Royalties from books, patents, etc.

Government benefits:

• Unemployment benefits
• Workers' compensation
• Disability payments

Other income:

• Gifts and inheritances
• Lottery winnings
• Social Security benefits themselves

When Earnings Are Counted

The earnings test uses when you earn the money, not when you're paid.

For employees: Earnings count in the year you perform the work, even if paid later

For self-employed: Earnings count when you provide the service or sell the product

Example timing issue:

• You work in December 2025 but get paid in January 2026
• Those earnings count toward your 2025 limit, not 2026
• This can affect whether you should claim benefits in December vs January

You Get It Back Later: The Recalculation

Important: Benefits withheld due to the earnings test aren't permanently lost. When you reach Full Retirement Age, Social Security recalculates your benefit to account for the months it was reduced.

How the Recalculation Works

Example:

• You claim at 62 with a benefit that should be $1,800/month
• Due to high earnings, your benefit is reduced to $600/month for 24 months
• At age 67 (FRA), Social Security recalculates as if you claimed later
• Your benefit increases to partially compensate for those 24 months of reduced payments

Why "Getting It Back" Doesn't Make It Break-Even

While you do get some money back, the recalculation typically doesn't fully compensate for the years of reduced benefits. You're usually better off just waiting until Full Retirement Age if you're working and earning over the limit.

The math rarely works out in your favor when the earnings test applies heavily.

Should You Claim Social Security While Working?

Usually NO If You're Earning Over the Limit

When it makes sense to wait:

• You earn more than $22,320/year
• You plan to work until Full Retirement Age anyway
• The earnings test would eliminate most or all of your benefits

Example: Better to wait

• Age 64, earning $55,000/year
• Potential benefit: $2,000/month
• Earnings test penalty: Would reduce benefit to about $300/month
• Better strategy: Wait until 67, receive full $2,000/month with no earnings test

Sometimes YES If You're Under the Limit

When it makes sense to claim:

• You earn less than $22,320/year
• You work part-time or seasonal work
• You can carefully manage your earnings to stay under the limit

Example: Part-time scenario

• Age 63, earning $18,000/year part-time
• Under the $22,320 limit
• Can receive full Social Security benefit with no reduction
• Gets 5 years of benefits before Full Retirement Age

Special Strategy: Claim in Retirement Year

If you retire mid-year: You might be able to claim Social Security for the months after you stop working, even if your annual earnings exceed the limit.

Example:

• Work January-June 2026, earning $40,000
• Retire in July, start claiming Social Security
• Earnings test only applies to months you're working AND receiving benefits
• July-December benefits aren't affected by January-June earnings

Real-World Scenarios: When It Works and When It Doesn't

Scenario 1: The High Earner Who Should Wait

Profile: Jennifer, 64, earning $75,000/year as a consultant

• Benefit if she claims now: $2,200/month
• Earnings test impact: $75,000 - $22,320 = $52,680 over limit
• Annual penalty: $52,680 ÷ 2 = $26,340
• Result: $0 benefits due to earnings test

Better strategy: Wait until Full Retirement Age (67)

• No earnings test at 67
• Full $2,200/month benefit regardless of work income
• Can work as long as she wants without penalty

Scenario 2: The Part-Timer Who Claims

Profile: Robert, 63, earning $15,000/year part-time at hardware store

• Under the $22,320 annual limit
• Benefit: $1,600/month with no reduction
• Gets to enjoy Social Security while staying active with work

Result: Smart strategy because he's under the earnings limit

Scenario 3: The Retiree Who Returns to Work

Profile: Maria, 65, retired and claiming Social Security, offered consulting work

• Currently receiving: $2,400/month Social Security
• Consulting offer: $45,000/year
• Earnings test impact: ($45,000 - $22,320) ÷ 2 = $11,340 annual penalty = $945/month withheld
• Would receive only: $2,400 - $945 = $1,455/month

Decision point: Is the consulting work worth it?

• Gross consulting pay: $3,750/month
• After earnings test reduction: Net Social Security drops by $945/month
• True value of consulting: $3,750 - $945 = $2,805/month net gain
• Plus she'll get some of the withheld amount back at Full Retirement Age

Scenario 4: The Year You Turn 67

Profile: Tom turns 67 in September 2026

• Working full-time earning $8,000/month ($96,000/year)
• Benefits: $2,500/month

January-August (before FRA):

• 8 months of earnings: $64,000
• Limit for 8 months: $39,680 (8/12 of $59,520)
• Over by: $24,320
• Penalty: $24,320 ÷ 3 = $8,107 total
• Monthly reduction: $1,013
• Receives: $1,487/month

September-December (after reaching FRA):

• No earnings test
• Receives full: $2,500/month regardless of earnings

Common Earnings Test Questions

Q: What if I'm self-employed?

A: The earnings test applies to net self-employment income. You can deduct legitimate business expenses, but the remaining profit counts toward the earnings limit.

Be careful: Don't manipulate your business income solely to avoid the earnings test. The IRS and Social Security Administration share information.

Q: Can I work for my spouse's business?

A: Yes, but wages from your spouse's business count as earnings. You can't avoid the earnings test by shifting your work to a family business.

Q: What about income from a previous year's work?

A: Only earnings from work performed in the current year count. Bonuses, royalties, or payments for work done in previous years don't count toward the current year's limit.

Q: Do I need to report my earnings?

A: Yes. Social Security requires you to report your estimated annual earnings when you apply for benefits. You must also report if your earnings change significantly during the year.

Q: What happens if I underestimate my earnings?

A: If you earn more than estimated, Social Security will withhold benefits and may require you to repay overpayments. Always estimate conservatively and report changes promptly.

Decision Framework: Should You Claim While Working?

Use this simple framework to decide:

Step 1: Calculate Your Penalty

• Annual work income: $______
• Minus earnings limit: $22,320
• Excess earnings: $______
• Penalty (÷ 2): $______

Step 2: Compare Your Options

Option A: Claim now with earnings test

• Monthly Social Security: $______
• Minus monthly penalty: $______
• Net Social Security: $______

Option B: Wait until Full Retirement Age

• Monthly Social Security at 67: $______ (no reduction)
• Years of benefits missed: ______
• Total benefits missed: $______

Step 3: Consider Your Situation

• How long do you plan to work?
• Do you need the reduced Social Security income now?
• How important is maximizing your monthly benefit?
• What's your health and life expectancy?

Step 4: Make Your Decision

Claim now if:

• You earn under $22,320/year
• You need income and the reduced benefit still helps
• You're in poor health (may not live to benefit from waiting)

Wait until 67 if:

• You earn significantly over $22,320/year
• You can afford to wait for the full benefit
• You plan to work until Full Retirement Age anyway

Tax Implications of Working and Receiving Benefits

Remember that both your work income AND Social Security benefits may be subject to income taxes.

Combined income for tax purposes:

• Adjusted Gross Income (work + other income)
• Plus half of Social Security benefits
• If total exceeds $34,000 (single) or $44,000 (married), up to 85% of Social Security is taxable

Double taxation risk: You could end up paying taxes on work income that was already reduced by the earnings test, plus taxes on the remaining Social Security benefits.

Learn more about Social Security taxes

Your Action Plan

If You're Planning to Claim While Working:

1. Estimate your annual earnings carefully

• Include all wages, tips, bonuses, and self-employment income
• Be conservative-overestimating is safer than underestimating

2. Calculate the earnings test impact

• Use our calculator or the worksheet above
• Factor in the monthly penalty amount

3. Consider your cash flow needs

• Can you afford to wait until Full Retirement Age?
• Is the reduced benefit amount still helpful?

4. Plan your work schedule strategically

• Consider reducing hours to stay under the limit
• Plan retirement timing to optimize benefits

If You Decide to Wait:

1. Continue working until Full Retirement Age

• No earnings test after age 67
• Higher monthly benefit due to additional work years
• Delayed retirement credits if you wait past 67

2. Consider other retirement income sources

• 401(k) or IRA withdrawals (not subject to earnings test)
• Part-time work that keeps you under the earnings limit

3. Plan your application timing

• Apply for benefits 3 months before you want them to start
• Coordinate with your work retirement date

Related Resources

Continue learning:

• Should I Claim at 62, 67, or 70? - Complete claiming age guide
• How Social Security Benefits Are Calculated - Understanding your benefit amount
• Social Security and Taxes - Tax implications of benefits
• Break-Even Analysis Calculator - When waiting pays off

Free tools:

• Social Security Calculator - See your benefits at each age with earnings test impact
• Earnings Test Calculator - Specific earnings test calculations

Official resources:

• SSA.gov/planners/retire/whileworking.html - Official earnings test information
• SSA.gov/myaccount - Your personal Social Security account

Need Help Planning Your Strategy?

The earnings test is just one factor in your Social Security claiming decision. Your optimal strategy depends on your work plans, health, marital status, taxes, and other retirement income.

The Benefora Decision Kit helps you coordinate all these factors:

Earnings test impact calculator for your specific situation Work and claiming coordination strategies Tax planning for working retirees Month-by-month action timeline Decision worksheets to organize your planning

$47 • Instant Download • 30-Day Money-Back Guarantee

Get the Complete Decision Kit →

This article provides educational information about Social Security earnings test rules. It is not financial, legal, or tax advice. For personalized guidance, consult qualified professionals. Benefora is not affiliated with the Social Security Administration.

Last updated: February 2026 with current earnings test limits and COLA adjustments.