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House, Senate Bills Call for Elimination of Retirement Earnings Test
Social Security’s “retirement earnings test,” long considered an impediment to retirement finance planning for many, is under scrutiny via bills introduced in the House of Representatives and the Senate. HR 8344 (Senior Citizens’ Freedom to Work Act of 2026) has been introduced by Rep. Greg Murphy (R-N.C.), and Sen. Rick Scott (R-FL) has long championed similar legislation under the topic of “Experience Matters: Seniors and the Workforce.” Whether either of these legislative initiatives will gain traction in the 119th Congress remains to be seen, although similar changes may be part of larger Social Security reform proposals aimed at addressing the program’s long-term funding problems.
A post yesterday by The Motley Fool’s Dana George provides additional information on the congressional bills addressing the “test.” We’ll just need to wait and see what happens between now and January.
What is the Retirement Earnings Test?
Social Security regulations stipulate that upon beginning retirement, spousal, or survivor benefits, beneficiaries are considered “retired” and expected to leave the workforce. Current regulations allow for continued earning from employment for those who claim benefits before their normal retirement age (NRA), but there is a limit to how much a worker can earn and continue to receive scheduledbenefits prior to reaching NRA.
Social Security sets annual limits on the earnings early filers can record before those benefits are reduced. The limit changes each year based on the National Average Wage Index (NAWI), with the 2026 limit set at $24,480. Exceeding that limit triggers a reduction of $1 for every $2 earned over the limit, causing an impact on benefit payments. In the year the early retiree reaches NRA, there is a different limit and a different reduction factor applicable to the months until the month full retirement age is reached.
The Social Security Earnings Test severely limits the ability of early retirees to earn income without having their benefits reduced. Because of this provision, many older Americans are forced out of the workplace when they would otherwise continue contributing to payroll tax revenue. Removing this provision would allow early retirees to increase their earnings while receiving Social Security benefits.
What Would be the Financial Effects of Eliminating the “Test”?
Eliminating this part of the Social Security rulebook would encourage seniors to work longer even if they receive Social Security retirement benefits, allowing them to bolster their savings for retirement. Seniors would contribute more to Social Security through FICA taxes, and SSA staff would be free of the extensive burden of tracking, enforcing, and following up on repayment of the withheld benefits. Further, this would eliminate one of the key sources of the overpayment problems plaguing SSA today.
Beyond reducing the administrative burdens, according to the Social Security Office of the Chief Actuary’s analysis, elimination of the Retirement Earnings Test would eliminate 1% of the long-term shortfall[1] via increased tax revenue.
[1] https://www.ssa.gov/OACT/solvency/provisions/charts/chart_run285.html (B7.11)