As Social Security continues to be a vital income source for many retirees, understanding how working while receiving benefits can affect monthly payments is crucial. With changes in income limits set for 2026, those who choose to work part-time or full-time while collecting Social Security need to be aware of the potential reductions in their benefits.
The Balance Between Working and Social Security Benefits
For millions of Americans, Social Security benefits serve as a crucial part of retirement income. However, many are finding that their monthly checks don’t go far enough. According to a 2025 survey from the Nationwide Retirement Institute, 61% of U.S. adults say they need to continue working later in life because their Social Security benefits are insufficient. As a result, many retirees are seeking to increase their earnings to supplement their income.
But there’s a catch: continuing to work while receiving Social Security benefits could lead to reductions in those benefits, depending on how much you earn and your age. This potential penalty is especially important for people nearing their full retirement age (FRA), which, depending on your birth year, ranges from 66 to 67 years old. The good news is that starting in 2026, retirees will be able to earn more before their benefits are affected. But how much more, and who will be impacted?
Income Limits and Reduction Rules for 2026
In 2026, Social Security recipients who have not yet reached their FRA will face income limits that determine how much of their benefits will be withheld based on their earnings. If you are under FRA and plan to continue working in 2026, you’ll need to stay within the newly increased limit of $24,480 before your benefits begin to decrease. According to the Social Security Administration, for every $2 you earn above this limit, $1 will be deducted from your monthly benefits.
For example, if you’re 65 years old in 2026, and your FRA is 67, earning $30,000 annually, you would exceed the limit by $5,520. This would result in a benefit reduction of $2,760 annually, or about $230 per month. While this might seem significant in the short term, it’s important to remember that these reductions are temporary.
How Full Retirement Age Affects Benefit Reductions
If you are within reach of FRA in 2026, you’ll be subject to a higher earnings limit, $65,160. For those who plan to work until reaching FRA, income earned up to this point will be counted toward the reduction limits. This means you can earn more before facing any cuts. However, for every $3 you earn above this new limit, $1 will be deducted from your Social Security benefits.
Importantly, once you reach your FRA, the earnings test no longer applies. At that point, you can work as much as you want without facing reductions to your benefits. Additionally, the Social Security Administration will recalculate your benefits once you hit your FRA, adjusting your monthly check to reflect the amounts that were previously withheld due to your earnings. This ensures that, over time, you will receive the full benefit amount you are entitled to.
A Temporary Setback with Long-Term Gains
Despite the temporary reductions in benefits, working while receiving Social Security can still make financial sense for many retirees. The ability to continue earning and working, even at the expense of some short-term cuts in benefits, may offer the opportunity to increase savings and delay claiming benefits. Moreover, once FRA is reached, retirees will see their benefit amounts recalculated and adjusted for the withheld amounts, leading to higher payments in the long run.
Ultimately, understanding the potential impact of income limits is essential for anyone considering continuing work while collecting Social Security. By knowing how much you can earn before reductions kick in, retirees can make better financial decisions and plan accordingly for a stable retirement.
