Working during retirement could be a great decision for both your finances and your general well-being. A part-time job can provide extra income to cover rising expenses and make it easier to keep up with inflation. But beyond the financial benefits, working can also help you stay socially connected, add structure to your days, and relieve the boredom that may come with leaving the workforce.

But if you’re collecting Social Security, it’s important to know about the program’s earnings test. If you don’t understand how it works, you could end up with reduced monthly benefits — and a truly unwanted financial surprise.

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How the earnings test works

Social Security’s earnings test only applies if you’ve claimed benefits before reaching full retirement age, which is 67 for folks born in 1960 or later. The earnings test dictates that you can earn a certain amount of money each year from a job before having benefits withheld.

In 2026, if you don’t reach full retirement age by the end of the year, you can earn up to $24,480 without negatively affecting your benefits. Once your earnings exceed that limit, the Social Security Administration (SSA) withholds $1 in benefits for every $2 you earn.

If you’ll be reaching full retirement age by the end of the year, the earnings-test limit is higher. In that case, you can earn up to $65,160 without having benefits withheld. And beyond that point, you’ll have $1 in Social Security withheld per $3 of earnings.

Withheld Social Security income isn’t lost forever. Once you reach full retirement age, the SSA will recalculate your monthly payments and return the withheld funds as larger checks. But having that money withheld could still cause a near-term cash crunch.

If you’re counting on Social Security plus your earnings from a job to cover all of your expenses, having benefits withheld could make life difficult. And the fact that you get withheld benefits back may not be much consolation if you won’t reach full retirement age for years and have to pay the electric or gas bill next week.

Be prepared

It’s a great thing to work while collecting Social Security, but it’s important to know what to expect. Exceeding the earnings-test limit won’t necessarily upend your finances if you’re prepared for the consequences. But if you don’t know how to anticipate withheld benefits, your finances could suffer.

You should also know that it’s only earned income that counts toward Social Security’s earnings test. If you have money in an IRA or 401(k), withdrawals don’t count. So if you end up having benefits withheld because you earn too much and still need a little extra cash to cover your expenses, turning to your retirement savings shouldn’t affect your monthly checks.

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