Working While Retired? The $24,480 Social Security 'Earnings Test' Trap in 2026

Working While Retired?

With inflation driving up the cost of eggs and electricity, many seniors are returning to the workforce. It seems like a smart move: collect your Social Security check AND a paycheck from a part-time job. Double income, right?

Not so fast. If you haven't reached your Full Retirement Age (FRA), making too much money can actually trigger a "withholding rule" that pauses your benefits.

It is called the Retirement Earnings Test, and in 2026, the official magic number is $24,480.

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1. The Rule: $1 for $2

The Social Security Administration (SSA) has a strict rule for early retirees (usually those aged 62 to 66):

⚠️ The Withholding Formula

If you are under your Full Retirement Age for the entire year of 2026, the SSA will withhold $1 in benefits for every $2 you earn above the annual limit ($24,480).

Example Scenario:
Let's say you get a job paying $34,480 a year. That is $10,000 over the limit.
The SSA will withhold $5,000 from your yearly Social Security benefits. If your monthly benefit is $2,000, they will completely stop your checks for 2.5 months.

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2. What Counts as "Earnings"?

This is where it gets tricky. Not all money counts towards this limit.

• What COUNTS: Gross wages from a job, net earnings from self-employment. Basically, money you work for.
• What does NOT Count: Pensions, interest, dividends, capital gains, 401(k) withdrawals, or VA benefits. You can be an investment millionaire and still get your full check.

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3. The "Special Year" Rule (Turning FRA)

In the year you reach your Full Retirement Age (e.g., turning 67 in 2026), the rules become much more generous.

• The earnings limit jumps significantly to $65,160 (Official 2026 Limit).
• The withholding drops to $1 for every $3 earned above the limit.
• Once you blow out the candles on your FRA birthday, the earnings test disappears forever. You can make $1 million a year, and your Social Security check won't be touched.

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4. Is the Money Lost Forever?

This is the most common misconception. The withheld money is not a tax; it is a deferral.

Once you reach your Full Retirement Age, the SSA recalculates your monthly benefit to credit you for the months they withheld. Your monthly check will actually increase slightly to pay you back over time.

However, the cash flow problem is real. If you need that Social Security check to pay rent today, having it paused because you worked too much can be a financial disaster.

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Calculate Before You Commit

Before accepting that greeting job at Walmart or consulting gig, pull out a calculator.

If your wages slightly exceed $24,480, you might be working for free effectively, as your government check shrinks. Sometimes, staying just under the limit is the smartest financial move you can make in 2026.