Millions of Americans collect Social Security Benefits every month, but a growing number of them continue working to meet financial goals or cover rising living costs. While this combination can provide additional income, it also comes with certain restrictions on how much you can earn without affecting your benefits.

Starting in 2026, the Social Security Administration (SSA) will make important adjustments to how income and benefits interact for people who are still working while receiving Social Security. These changes will simplify certain rules, raise earning limits, and finalize the phase-in of the new full retirement age.

Understanding these new guidelines is essential for anyone nearing retirement or currently receiving benefits. This article explains what’s changing, why it matters, and what you should do to prepare before the new rules take effect.

What Is the Social Security Earnings Test?

The Social Security Earnings Test determines how much you can earn while collecting benefits before the SSA temporarily withholds part of your payment. It applies to anyone who starts claiming retirement benefits before reaching full retirement age (FRA).

Currently, if you earn above a specific threshold, part of your benefit is held back. These withheld payments are not lost; they are recalculated and added back once you reach your full retirement age. This means the test affects the timing of your income, not the total lifetime benefit.

The system is designed to encourage people to delay claiming benefits or to keep their annual income at a manageable level while still in the workforce. However, the rules for how these limits are calculated and applied are now set to change significantly in 2026.

The 2025 Rules: How They Work Now

Under the 2025 guidelines, there are two earning thresholds depending on your retirement age status.

If you are under full retirement age for the entire year, you can earn up to $23,400 without losing any benefits. For every $2 earned above that limit, $1 in benefits is withheld.

If you reach full retirement age during the year, you can earn up to $62,160 before any reduction applies. Above that amount, the SSA withholds $1 in benefits for every $3 earned.

Once you reach full retirement age, currently between 66 and 67 depending on your birth year, there is no earnings limit. You can work and earn as much as you want without losing benefits.

The 2026 Updates: What Will Change

The 2026 updates are among the most significant adjustments in the last decade. They focus on simplifying benefit calculations, raising annual income limits, and finalizing the retirement age increase.

Removal of the Monthly “Special Rule”

At present, Social Security uses a monthly test during the first year of retirement. This rule helps determine if you worked too much in a particular month. However, starting January 2026, this monthly test will be removed, meaning only annual earnings will be used to decide benefit reductions.

The SSA confirmed in its 2025 policy guidance that the removal aims to make the system easier to understand and more consistent across all benefit recipients.

Higher Annual Earnings Limits

The SSA adjusts earnings limits each year based on the national average wage index. For 2026, those limits are expected to rise:

The under-FRA earnings limit may increase to approximately $24,360.
The year-you-reach-FRA limit could rise to about $64,800.

While these numbers are estimates until SSA’s official release, both USA Today and The Motley Fool have reported similar projections for the 2026 adjustment.

Comparison Between 2025 and 2026 Work Rules

Category
2025 Rule
2026 Rule (Projected)

Annual earnings limit (below FRA)
$23,400
$24,360

Annual earnings limit (year you reach FRA)
$62,160
$64,800

Monthly “special rule”
Applies during first year of retirement
Eliminated (only annual test applies)

Full retirement age
66 years + 10 months (for 1959 birth year)
67 years (for 1960 and later)

The Full Retirement Age Becomes 67

Another milestone in 2026 is the completion of the gradual rise in the full retirement age (FRA). For people born in 1960 or later, the FRA will officially become 67 years.

This means anyone claiming benefits before age 67 will face a permanent reduction in monthly payments, as much as 30% lower if they start at age 62.

The higher retirement age also means that many individuals will be subject to the earnings test for longer if they continue working in their early 60s. For those delaying retirement, however, it extends the period during which they can accumulate delayed retirement credits, increasing future payments by 8% per year until age 70.

What Income Counts Toward the Limit

The SSA only counts earned income, such as wages, salaries, bonuses, and net earnings from self-employment, when applying the earnings test. Other types of income are excluded.

Income That Counts

Wages and salaries from an employer
Net earnings from self-employment
Commissions or bonuses

Income That Does Not Count

Investment returns, dividends, or interest
Pension payments and annuities
Withdrawals from retirement accounts (IRA or 401(k))

This distinction is important because many retirees rely on multiple income sources. Understanding what counts can prevent accidental overreporting or unexpected benefit withholding.

How Benefit Withholding Works

If your earnings exceed the annual limit, the SSA temporarily withholds benefits based on your reported income.

For those under full retirement age, $1 is withheld for every $2 earned above the annual threshold. For people reaching full retirement age during the year, $1 is withheld for every $3 earned over the higher limit.

When you reach full retirement age, your benefit is recalculated to credit the months in which benefits were withheld. This ensures you eventually recover the withheld value through higher monthly payments going forward.

While the process does not permanently reduce total lifetime benefits, it can affect short-term budgeting and monthly cash flow.

Real-Life Example for 2026

Consider a retiree named Mary who starts collecting Social Security at age 63 in 2026. She plans to continue part-time work, earning $30,000 annually.

Since the projected annual limit for 2026 is $24,360, Mary earns $5,640 above the limit. For every $2 earned above the threshold, $1 in benefits will be withheld equal to $2,820 in a temporary reduction.

Once she reaches full retirement age (67), her benefit amount will be recalculated, effectively crediting the withheld funds through higher payments.

This example highlights the importance of tracking total annual income, especially under the new annual-only rule starting in 2026.

How to Prepare for the 2026 Changes

The shift from monthly to annual calculations will simplify benefit management, but workers should still plan carefully.

Estimate your total annual earnings if you plan to continue working while receiving benefits.
Report your earnings accurately to SSA to avoid overpayment issues.
Review your tax situation, since a higher income could make part of your Social Security benefits taxable.
Use SSA’s Retirement Earnings Test Calculator to forecast how work income might affect your benefits.

This is the only list section included, designed for practical reference and kept brief.

Impact on Retirees

The 2026 rule changes are expected to make retirement planning easier, especially for people balancing part-time work with benefits. Removing the monthly rule eliminates confusion about which months count and ensures a single, annual review for all beneficiaries.

The increase in earning limits means more Americans can stay active in the workforce without immediately losing part of their benefits. This could particularly benefit older workers facing inflation, higher medical expenses, or delayed retirement savings recovery.

While SSA’s overall system of recalculating benefits after FRA remains the same, the new approach provides a clearer path for retirees who wish to work consistently throughout the year without worrying about month-to-month fluctuations.