Next year will bring a slew of changes to Social Security, including a new cost-of-living adjustment (COLA). Retirees can expect a 2.8% raise in January 2026, which will amount to around $56 per month for the average retired worker.
The upcoming changes will also affect those who are working while on Social Security, and there's good news coming in 2026. Here's everything you need to know.
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How your income can affect your benefit amount
Many people choose to retire once they file for Social Security, but it's possible to continue working while collecting benefits. Depending on your age and earnings, however, your benefit could be substantially reduced.
The Social Security earnings limits only apply if you haven't yet reached your full retirement age (FRA) -- which is between ages 66 and 67, depending on your birth year. There are two different limits: one for those who will not reach their FRA in 2026, and a second for those who will.
The more you earn over either limit, the more your benefit will be reduced. The good news, however, is that these limits are set to increase in 2026. This means that you'll be able to earn more before facing benefit reductions.
| Income Limit 2025 | Income Limit 2026 | Benefit Reduction | |
|---|---|---|---|
| If you will not reach your FRA in 2026 | $23,400 per year | $24,480 per year | $1 reduction for every $2 over the limit |
| If you will reach your FRA in 2026 | $62,160 per year | $65,160 per year | $1 reduction for every $3 over the limit |
Source: Social Security Administration. Table by author.
Higher earnings limits mean you can keep more of your benefits in the short term, and they may even allow you to avoid reductions altogether.
For example, say you're 62 years old and working part-time in retirement, earning $24,000 per year. Since you're under your FRA, that income would be $600 over the limit in 2025, reducing your benefit by $300 per year. But in 2026, your income will be below the limit, so you won't face any reductions at all.
Similarly, say that you're earning a higher income of $30,000 per year while under your FRA. In 2025, that would be $6,600 over the limit, resulting in a reduction of $3,300 per year. But in 2026, it's only $5,520 over the limit, reducing your payments by only $2,760 per year. In other words, this higher limit would allow you to keep an extra $540 per year in benefits.
What happens to the benefits that are withheld?
No matter how much you're earning in wages, these benefit reductions are only temporary. Once you reach your FRA, the Social Security Administration will recalculate your benefit to account for the reductions, and you'll begin receiving a larger payment.
Also, after your FRA, your earnings will not affect your benefit amount regardless of your income. Over a lifetime, the higher payments should ensure you recoup all of the benefits that were withheld due to your wages.
In the short term, though, these reductions can throw a wrench in your plans. If you're going back to work to increase your income, yet your income ends up shrinking your benefits by hundreds of dollars per month, continuing to work may not help as much as expected.
If you need to work for financial reasons, you may not have much of a choice. But it's still wise to know how your wages will affect your benefits, and starting in 2026, higher income limits can help you keep more of your monthly payments.
