Everyone's retirement plans look different. Some people want to travel more; some want to take on new hobbies or embrace old ones; some want to work on passion projects; and some just want to enjoy their well-earned relaxation. Whatever the case, one thing is true for most retirees: The more money you have, the easier it is to make these things happen.
And since Social Security plays a large part in most Americans' retirement finances, many try to do whatever they can to maximize their benefits, including working and continuing to earn money even after claiming benefits.
If you're claiming Social Security, there's nothing wrong with continuing to earn money. However, if you file for Social Security before your full retirement age, you'll need to keep an eye on how much you earn, or you could be subject to the Social Security retirement earnings test (RET).
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How the Social Security RET works
The idea behind Social Security's RET is to prevent people from collecting full benefits while still earning substantial income from other sources. Specifically, the Social Security Administration (SSA) is focused on earned income, which could be from a paycheck, bonuses, tips, or commissions. Notable income excluded from the calculation includes investment income such as dividends, withdrawals from a retirement account, and pension payments.
If you won't reach your full retirement age in 2026, the earnings limit is $24,480, up from $23,400 in 2025. Earning above that amount will reduce your benefits by $1 for every $2 over that amount. For example, if you were to earn $34,480, your benefits would be reduced by $5,000 (the difference of $10,000 divided by 2).
If you hit your full retirement age in 2026, the limit is $65,160, up from $62,160 in 2025. Earning above that amount will reduce your benefits by $1 for every $3 over. In this case, if you earned $71,160, your benefits would be reduced by $2,000 (the difference of $6,000 divided by 3).
Again, it's important to note that this only applies if you are claiming Social Security before your full retirement age. If you claim at or after your full retirement age, you can earn as much as you'd like without having to worry about being subjected to the Social Security RET.
What happens to the benefits that are withheld?
The one silver lining is that withheld benefits aren't permanently lost; they're deferred. Once you reach full retirement age, the SSA recalculates your monthly benefit in a way that gradually returns the withheld amount over the remainder of your lifetime.
It does this by taking into account the number of months it withheld any benefits and then adjusting your benefit as if you had claimed later than you actually did. As a result, the program effectively increases your monthly benefit going forward to credit you back for the withheld amount.
A special rule for the first year of retirement
When people retire mid-year, there's a chance they have already earned above the RET threshold. If the typical RET rules applied, many people would have their benefits noticeably reduced. To avoid that situation, Social Security offers a special first-year rule that looks at your monthly income instead of annual income.
To be considered, your monthly income must be $1,950 or less when you're younger than your full retirement age for that entire year.
For example, let's say a person retires in September after making $50,000 through the first nine months of the year. Even though this is above the RET limit, they can still receive their full checks for October, November, and December if their monthly earnings in those months stay at $1,950 or below.
