Even if you're entitled to a pretty generous monthly benefit from Social Security, that check may not be enough to cover all of your retirement expenses.
Social Security will replace about 40% of your pre-retirement wages if you earn an average paycheck. But it's pretty hard for seniors to live on just 40% of their former income.
Image source: Getty Images.
Even if you're willing to live frugally, you may find that between housing, utilities, food, and healthcare, your Social Security checks are beyond maxed out every month. And so you may need to supplement your monthly benefits with earnings from a part-time job.
The good news is that you're allowed to work while collecting Social Security. But if you're not careful, you could lose some of your benefits this year.
Understand how Social Security's earnings test works
Once you've reached full retirement age, you can earn any amount of money from a job without it having a negative impact on your benefits. But prior to full retirement age, if you work while receiving Social Security, you'll be subject to an earnings test. And exceeding its limits could mean having some benefits withheld.
Social Security's earnings-test limits are set each year. In 2026, you'll have $1 in Social Security withheld per $2 of income above $24,480.
If you'll be reaching full retirement age later in the year, the rules are a bit different. In that case, you'll have $1 in Social Security withheld per $3 of income above $65,160.
Withheld benefits in this situation are not lost forever. Once you reach full retirement age, your monthly payments will be recalculated and increased to make up for the money that was held back from your checks earlier.
But still, the end result is that you may not get the monthly income you're after if you earn too much money and exceed the earnings-test limit that applies to you. It's important to know what those limits look like so there are no surprises.
Be careful with an early claim
If you're old enough to claim Social Security but haven't reached full retirement age, and you know you intend to keep working, then you may want to hold off on signing up for benefits. Even though withheld benefits for exceeding the earnings-test limits are repaid to you eventually, if you claim Social Security prior to full retirement age, your monthly benefits will be reduced permanently.
That reduction could come back to bite you later on in retirement, such as if your income needs increase or you end up with health issues that are expensive to cover. A better bet may be to try to see if you can get by on whatever income you're bringing in from a job, even if that means living extra frugally for a few years so you can sit tight on Social Security until full retirement age arrives.
Of course, that may not be feasible. And you may find that you have to claim Social Security, even if you're going to continue to work. In that case, just make sure you understand how much you can earn before risking having a portion of your monthly checks withheld.
