The Social Security “Earnings Test”–Unraveling Persistent Misconceptions

One of the most misunderstood of Social Security’s hundreds of filing rules involves the “Earning Test” provision (some would label it the dreaded or annoying Earnings Test). This provision is that part of the rulebook that potentially reduces retirement benefits for those remaining in the workforce after starting their monthly benefits before their full retirement age (FRA). There is an earnings limit ($18,240 in 2020) for early filers that, if exceeded, would cause benefits to be withheld and, as a result of this rule, many workers curtail their earnings to stay below this limit.

USAToday contributor and editor of TheStreet’s Retirement Daily, Robert Powell, examines the “Earnings Test” in a post on, suggesting that many workers are in effect shortchanging themselves–and their beneficiaries–by actively limiting their earnings to avoid the reduction in monthly benefits. Powell’s article attributes this to a misunderstanding of how the withheld benefits are handled, and offers this statement as evidence, “Beneficiaries don’t appreciate the fact that benefits lost today are not gone forever, says Daniel Sacks, an assistant professor at Indiana University and co-author of ‘Misperceptions of the Social Security Earnings Test and the Actuarial Adjustment: Implications for LFP and Earnings.'” In fact, under Social Security operating rules, any benefits withheld as a result of the ‘Earnings Test” are later returned to beneficiaries in the form of a recalculated benefit amount at their full retirement age.

Read Robert Powell’s article here, and if you still have questions about the “Earnings Test” and how it works, know that the AMAC Foundation’s Social Security Advisory staff can help clarify the process for you. This service is offered at no charge to the public, and can be accessed via the Foundation’s website.


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