Everything You Need to Know About The Social Security Earnings Test

Social Security is a federal Old-Age, Survivors, and Disability Insurance (OASDI) program. It provides workers with financial support during retirement by offering a reliable income source once you stop working. It also provides financial assistance if a disability prevents you from being able to work. The program is funded primarily through payroll taxes collected under the Federal Insurance Contributions Act, commonly referred to as FICA, with contributions made by both employees and employers throughout their working years.

However, simply paying into the system does not automatically guarantee you will receive Social Security benefits. You must meet specific eligibility rules and conditions to qualify. Depending on your circumstances, you may receive a reduced benefit amount rather than the full amount. For instance, if you choose to continue working while receiving benefits, you may be subject to the Social Security Earnings Test and your monthly benefit amount may be reduced.

Whether Social Security is your primary source of income in retirement or something you rely on to supplement other income, it is important to understand how the system works. Let’s take a closer look at the Social Security earnings limit and how it works.

How does the Social Security Earnings Test work?

Before you reach your Full Retirement Age (FRA), continuing to work while also collecting Social Security benefits comes with a catch. This is where the Social Security Earnings Test, officially known as the Retirement Earnings Test (RET), comes into play. The rule gives the Social Security Administration (SSA) the authority to temporarily hold back a portion of your benefits if your annual income goes above the Social Security earnings limit.

Here is how the Social Security Earnings Test works in practice:

If you start claiming Social Security benefits before reaching your full retirement age and are also working and earning more than the allowed threshold, you will be subject to the earnings test. If this happens, your benefits will be reduced for as long as you are under the applicable full retirement age and continue to earn above the Social Security earnings limit.

Now, while it lowers your Social Security check, you do not have to be disheartened just yet. The good news is that none of the money that is withheld is really taken away from you. It is simply stored away for the time being. It gets factored back in once you reach your full retirement age, at which point your monthly benefit amount is recalculated and increased to make up for what was previously withheld. So, you don’t end up losing that money; you just receive it later.

The Social Security Earnings Test is only relevant to the following individuals:

People who are actively working while also collecting Social Security retirement or survivor benefits.
People who have not yet reached their full retirement age.

If you fall into this category, your benefits are subject to the Social Security Earnings Test for as long as you remain under your full retirement age. However, once you actually reach your full retirement age, the earnings test no longer applies to you at all. From that point forward, you are free to earn as much as you want or can, without it impacting your Social Security benefits in any manner.

How much of your money is withheld if you do not meet the Social Security earnings limit?

The amount withheld from your benefits depends on your full retirement age.

If you are under your full retirement age for the entire year, the Social Security income limit before full retirement age is set at $2,040 per month, or $24,480 annually as of 2026.
If your income goes above this threshold, $1 is withheld from your benefits for every $2 you earn beyond the limit.

But this changes the year you reach your full retirement age.

For the months leading up to your birthday, the earnings limit is increased to $5,430 per month, or $65,160 annually.
During this period, the withholding rate is reduced, with only $1 withheld for every $3 earned above the limit.

But once you actually reach your full retirement age, and for every year after that, this restriction does not apply. From that point on, you can earn as much or as little as you want without there being any consequences for your Social Security benefits.

Exception

The SSA has a special rule that applies specifically to the first year you claim benefits. Under this rule, the SSA can pay you a full Social Security check for any individual month they consider you retired, regardless of how much you earned across the entire year. Here’s how it plays out depending on your situation.

If you will be under your full retirement age for the entirety of 2026, you are considered retired in any given month where your earnings come in at $2,040 or less, provided you also did not perform substantial work in self-employment during that month.
If you will actually reach your full retirement age sometime in 2026, you are considered retired in any month where your earnings are $5,430 or less. Again, this applies as long as you did not perform substantial self-employment services during that time.

How is the full retirement age calculated for the Social Security Earnings Test?

Now you may be wondering what your own full retirement age actually is. The answer depends largely on the year you were born. If you were born in 1960 or later, your full retirement age is 67. If you were born before that, your full retirement age differs.

Here’s a breakdown of your full retirement age by birth year:

1943 to 1954: Full retirement age is 66, with 48 months between age 62 and full retirement age.
1955: Full retirement age is 66 and 2 months, with 50 months between age 62 and full retirement age.
1956: Full retirement age is 66 and 4 months, with 52 months between age 62 and full retirement age.
1957: Full retirement age is 66 and 6 months, with 54 months between age 62 and full retirement age.
1958: Full retirement age is 66 and 8 months, with 56 months between age 62 and full retirement age.
1959: Full retirement age is 66 and 10 months, with 58 months between age 62 and full retirement age.
1960 and later: Full retirement age is 67, with 60 months between age 62 and full retirement age.

Your full retirement age matters for more than one reason in the Social Security system. Regardless of when you decide to claim, your benefit amount is still calculated based on your highest 35 years of earnings throughout your working life. However, timing still matters. While you can technically start receiving retirement benefits as early as age 62, you are only entitled to your full benefit amount once you reach your actual full retirement age. And, if you choose to delay claiming beyond your full retirement age, all the way up to age 70, your benefit amount will increase the longer you wait. If you decide to start receiving benefits at age 62, your monthly benefit amount will be permanently reduced compared to what you would receive by waiting until your full retirement age.

A few key points are worth keeping in mind here.

First, these reductions are permanent. They are not corrected or adjusted later.
Second, the earlier you claim, the larger the reduction.

What type of incomes are considered for the Social Security Earnings Test?

The Social Security Earnings Test looks exclusively at earned income. The following types of income qualify for the test:

Wages and salary, including your gross pay along with any bonuses, commissions, and vacation pay you receive. This income counts based on when it is earned, not necessarily when it is actually paid out to you. For example, if you earn a Christmas bonus in December but the money is credited to your account in February, it still counts toward the year you earned it.
If you are self-employed, the Social Security Earnings Test looks at your net earnings and not gross income. For instance, if you run a business and earn $20,000 in revenue but also incur $10,000 in business expenses, only the remaining $10,000 in net profit counts toward the test. However, for self-employed individuals, income counts when you actually receive it, not necessarily when you earned it. The one exception here is if that income is paid out in a year after you have already become entitled to Social Security, but was actually earned before your entitlement began. In that specific case, the earlier timing rule applies instead.

The following types of income do not qualify for the test:

Withdrawals from retirement accounts, such as 401(k)s, traditional or Roth IRAs, 403(b)s, and Keogh plans.
Investment income, such as capital gains, dividends, rental income, interest, etc.
Pensions and annuity payments from a private or government employer.
Military retirement benefits.
Government benefits, such as veterans’ benefits.

Things to keep in mind if you work after retirement and collect Social Security benefits

If you are still working and earning an income, you may not actually need to claim your Social Security benefits just yet. Since your earnings are likely already covering your day-to-day needs, delaying your benefits could work in your favor over the long run. Delaying your benefits generally allows your future benefit amount to grow. If you find yourself needing another source of income in the meantime, you can explore other options before looking into your Social Security benefits. If you can, leaving your Social Security untouched for now tends to pay off later with long-term advantages. In fact, delaying to claim your benefits until age 70 can increase your monthly check by up to 24% compared to claiming at full retirement age.

That said, if you do end up needing to withdraw Social Security benefits while still working, there is no need to worry excessively. This is, after all, just a temporary reduction. It is really just a matter of time before you receive the withheld money back. None of it is lost permanently, and you will eventually receive that money once you reach your full retirement age.

Given how much nuance is involved, it may help to speak with a financial advisor to understand how the Social Security income limit before full retirement age might affect your situation. You can also use the Social Security Earnings Test calculator to understand how you may be affected by the rule. The SSA provides this online tool that makes it easier to plan your withdrawals while earning an income.

Claim early or wait, it depends on your situation

It depends on what you want and need at this stage of life. If you do not mind taking a temporary hit to your Social Security benefits, as long as you are still receiving some income in the meantime, then claiming early while continuing to work could be the right choice for you. But if you can hold off, delaying your Social Security claim lets your benefit amount grow. And, in the meantime, your current income can cover your everyday expenses.

No two people’s financial situations look alike, so this really comes down to a judgment call based on your specific circumstances. Before making a final decision, speaking with a financial advisor who can walk you through the Social Security earnings limit rules can help. Our financial advisor directory can help you find the right fiduciary advisor for efficient retirement income planning.

Frequently Asked Questions (FAQs) about the Social Security Earnings Test

1. What is the Social Security Earnings Test?

The Social Security Earnings Test is a rule that considers your full retirement age if you withdraw Social Security benefits while still earning income. Based on the Social Security income limit that applies before you reach full retirement age, a portion of your benefits may be withheld once your earnings exceed a certain threshold, depending on the rules in place for that year.

For 2026,

Before full retirement age: The limit is $2,040 per month and $1 withheld for every $2 above the limit
Year you reach full retirement age: The limit is $5,430 per month and $1 withheld for every $3 above the limit

2. What is the Social Security Earnings Test calculator?

The Social Security Earnings Test calculator is an online tool provided by the SSA that lets you estimate how the earnings test may affect your monthly Social Security benefit if you earn income.