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Retirement Earnings Test Increase for 2026
Many Social Security benefit recipients who have not yet reached their full retirement age (FRA) but continue working are aware (or should be) of the Retirement Earnings Test, which limits the amount of income they can earn before benefits are reduced. For 2025, this limit is $23,400, after which $1 in Social Security benefits will be withheld for each $2 of earnings. This limit is adjusted each year based on the National Average Wage Index, and the 2026 limit has been set at $24,480. If you’re reaching FRA next year, the limit for 2026 will be $65,160, and it will disappear completely the month you reach FRA. For a quick recap of this provision, check out this post by the Motley Fool’s Maurie Backman.
Administration of the earnings test is overly complex, resulting in an extraordinary amount of clerical effort to track. The reporting and verification processes place a substantial recordkeeping burden on workers and Social Security Administration staff and often contribute to the overpayments so often highlighted in the media. Likewise, for those who elect to file early, it is often a surprise that affects cash flow planning in retirement, especially among those intending to use the extra income to bolster their savings for later years.
From a Social Security revenue perspective, limiting the earnings of retirees reduces payroll taxes, thus exacerbating the program’s financial problems. Eliminating this provision would encourage workforce participation and allow retirees to earn more and pay more into the program via FICA taxes.
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I think the earnings penalty on us retirees should be removed completely. With the prices of food, shelter, medicines and everything else going higher all the time, I feel like we are being punished for retiring g before our so called age discriminative FrA.