Dec 21, 2025
Whether by choice or necessity, a growing number of American seniors are working well into their golden years. As of 2024, 23.4% of men and 16.2% of women over the age of 65 were still employed, according to the Bureau of Labor Statistics (BLS) (1).
Many of these seniors are also collecting Social Security benefits while at work. According to the Center for Retirement Research at Boston College, roughly 40% of individuals work after claiming benefits, often for several years (2).
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The system allows beneficiaries to earn some employment income, but only up to a certain limit. Beyond these thresholds, benefits are clawed back and withheld. If you’re in this situation, understanding how the rules work and what the threshold is for income in 2026 could be a key part of your financial plans.
Here’s what you need to know.
Income test for 2026
Working while collecting benefits is permitted. However, income from your work could impact your benefits depending on your age and level of income.
If you’re below Full Retirement Age (FRA), you can earn up to $24,480 in 2026 without impacting your benefits (3). This threshold is adjusted every year and is currently 1,080 higher than the previous year. For every $2 you earn above this threshold, the Social Security Administration (SSA) will withhold $1 in benefits.
These earning restrictions are greatly relaxed in the calendar year you reach FRA. If you reach FRA in 2026, you can earn up to $65,160 — $3,000 more than the previous year — before your benefits are impacted. The withholding rate is also more generous for beneficiaries who reach FRA in 2026. The SSA will withhold only $1 for every $3 in earnings above this threshold.
Once you reach FRA and beyond, the income limit no longer applies. You can earn any amount without impacting your benefits.
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What counts as income?
Retirees probably have multiple sources of income, and fortunately, the SSA doesn’t consider all forms of income for its earnings test. Simply put, only earned income is used for the test. That means any wages, salaries or bonuses you earn from your employer. If you’re self-employed, only net income is considered for the earnings test.
Most forms of passive income, including other government benefits, investment earnings, interest, pensions, annuities and capital gains, are not included in the test.
In other words, if you’re primarily relying on passive income and only working part-time or on a casual basis, you’re unlikely to hit the thresholds that trigger benefit withholdings.
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If you cross the threshold, it’s important to know that the amount withheld is not lost forever and could actually boost your benefits over the long-term.
Withheld income is not “lost forever”
The SSA’s earnings test is designed to withhold, not eliminate, benefits in early retirement.
Imagine you turn 62 in 2026 and start claiming benefits. You receive $1,200 a month from Social Security and earn $29,000 a year from part-time work. Because that income exceeds the annual earnings limit by $4,520, the agency withholds $2,260 — half of the amount over the threshold. In practical terms, that’s roughly two months of benefits.
If the same pattern continues and you lose about two months of payments each year until you reach full retirement age at 67, the cumulative reduction would add up to roughly 10 months. At that point, Social Security adjusts your benefit as though you had filed 50 months early rather than 60. The difference is noticeable: filing five years early normally yields about 70% of your full benefit, while filing 50 months early lifts it to roughly 74.2%.
Those additional working years can also push your benefit higher if they replace lower-earning years in your 35-year wage record. The program calculates benefits using an average of your highest years of earnings, so stronger income late in your career can lift that average — and your monthly check — for the rest of retirement.
Nevertheless, losing some of your benefits for a few years could still impact your retirement plan and budget, so make sure you account for this earnings test before you retire, claim benefits or take a new job.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
U.S. Bureau of Labor Statistics (1); Center for Retirement Research at Boston College (2); Social Security Administration (3)
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
