Working and claiming Social Security at the same time might seem like a great way to boost your standard of living -- and it can be. But it doesn't always pan out that way.
A little-known rule called the Social Security earnings test could cost you some of your benefits if you earn more than a certain amount from your job. But this doesn't apply to everyone, and it could have some unexpected benefits down the line.
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How the Social Security earnings test works
The Social Security earnings test applies to individuals who are working and claiming benefits while under their full retirement age (FRA). This is 67 for most workers today. If you're older than this, you can earn as much as you'd like, and the Social Security Administration won't touch your benefits.
If you'll be under your FRA all year, you'll lose $1 for every $2 you earn over $24,480 in 2026 from your job. Those who will reach their FRA in 2026 only lose $1 for every $3 they earn over $65,160 if they hit this limit before their birth month.
You may lose entire checks due to the earnings test, depending on the size of your benefit and your current annual income. You might be able to avoid this by reducing your hours to decrease your earnings from your job. Or if you haven't signed up for Social Security yet, you could delay your application until you either retire or reach your FRA.
It's also possible that you might not have to worry about the earnings test in future years if your income is close to the thresholds mentioned above. The Social Security Administration typically increases these limits annually. So, you'll be able to earn more in 2027 and beyond before losing any of your checks to the earnings test.
You'll get the money back later
Money you lose to the earnings test will come back to you as a benefit increase when you reach your FRA. This is a permanent boost, not a one-time payment.
How much more you'll get depends on how much you had withheld in past years, but for some, the increase is substantial. The Social Security Administration should send you a notice outlining how much you'll get once you reach your FRA so you can prepare.
Keep in mind that larger Social Security checks could put you at risk of owing federal Social Security benefit taxes. Some states tax the benefits of some of their seniors as well. This continues even after you've reached your FRA.
If you're concerned about this, consult an accountant in your state to get an idea of how much you may owe. Then, budget accordingly for the taxes. You can also request that the Social Security Administration withhold money from your benefits for taxes. Any excess withheld will come back to you with your tax refund.
In the meantime, while you're subject to the earnings test, you may need to come up with other ways to make ends meet. That might mean relying more heavily on income from your job or personal savings to make up for reduced Social Security benefits. Alternatively, you may be able to reduce your expenses in certain areas.
Take some time to develop a strategy that works for you so you're ready when 2026 rolls around. And if you have any questions about your benefits or the earnings test, contact the Social Security Administration for personalized advice.
