Working While on Social Security Before 67? This Earnings Trap Catches More Retirees Every Year.

Millions of Americans claim Social Security before reaching full retirement age - and many continue working. What most do not know in advance is that the Social Security Administration withholds benefits once their earnings cross a specific annual threshold. In 2026 that threshold is $24,480.

For every $2 earned above $24,480, SSA withholds $1 in benefits. A retiree under full retirement age who claims at 62 and earns $40,000 in a year would have $7,760 withheld - reducing their annual Social Security income by nearly a third.

Why More Retirees Are Running Into This

The combination of rising full retirement age, inflation pushing working retirees past the earnings threshold, and the growing trend of phased retirement - working part-time while collecting - has expanded the population exposed to this rule. In 2025 the threshold was $22,320. In 2026 it rose to $24,480. For a retiree earning $25,000 or $30,000 from a part-time position, crossing the limit is now common.

The 60 percent of Americans who claim Social Security before full retirement age are subject to the earnings test for every year until the month they reach full retirement age. Full retirement age is 67 for anyone born in 1960 or later. For workers born in the late 1950s, full retirement age is 66 years and some months - and the test applies until that specific birthday month.

The Part People Miss

The withheld benefits are not permanent losses. Once you reach full retirement age, the Social Security Administration recalculates your benefit upward to credit the months when benefits were withheld. The adjustment is spread over your remaining lifetime of benefits. Over enough years, most or all of the withheld money returns - but the timing matters. Cash flow in the years before full retirement age is reduced; the recovery comes later.

A separate, more lenient rule applies in the year you actually reach full retirement age. In 2026, workers reaching full retirement age can earn up to $65,160 - counting only months before the birthday - with the withheld amount set at $1 per $3 over the limit rather than $1 per $2. Starting the month full retirement age is reached, the limit vanishes.

What to Do Before Claiming

Anyone considering claiming Social Security early while continuing to work should check SSA.gov’s Retirement Estimator to see the actual impact of the earnings test on their projected benefit under different earning scenarios. The calculation depends on your specific benefit amount, not just the general rule. A single year above the threshold has a calculable dollar impact that is worth knowing before choosing a claim date.

References: Benefits Planner: Retirement - Receiving Benefits While Working | Social Security Earnings Test Can Reduce Benefits for Retirees Who Work | 2026 Social Security Earnings Test