As the calendar turns to 2026, several modifications to Social Security's rules will come into effect that are poised to influence retirees who continue to earn income through work. While not all changes are substantial, one key adjustment may positively affect the amount of benefits such individuals are able to retain each month.
At the heart of these changes lie the increased income limits under the Social Security retirement earnings test. This test applies exclusively to beneficiaries younger than their full retirement age (FRA), which varies between 66 and 67 depending on birth year. The earnings test establishes thresholds for annual income; earnings above these thresholds can result in the temporary withholding of Social Security benefits.
Two distinct earnings limits are applicable: one applies to individuals who will attain their FRA during 2026, and the other to those who remain below the FRA for the entire calendar year. The Social Security Administration has announced increases to both these limits in 2026 compared to 2025, representing an opportunity for working retirees to earn more before encountering benefit reductions.
| Income Limit | 2026 | 2025 | Benefit Reduction |
|---|---|---|---|
| Under FRA for all of 2026 | $24,480 | $23,400 | $1 withheld for every $2 earned above limit |
| Reaching FRA in 2026 | $65,160 | $62,160 | $1 withheld for every $3 earned above limit |
This increase in the income thresholds means that retirees who have yet to reach their full retirement age could retain a larger portion of their Social Security benefits despite ongoing work earnings. For instance, consider an individual who is 65 years old with a FRA of 67, earning $35,000 annually from employment. Since this person will not reach their FRA in 2026, the lower threshold of $24,480 applies.
In this scenario, the earnings exceed the limit by $10,520, triggering a benefit reduction calculated as $1 withheld for every $2 above the threshold. This results in an annual withholding of $5,260, or approximately $438 per month.
Comparing this to 2025 figures, the same income would have exceeded the limit by $11,600, leading to a higher annual reduction of $5,800 ($483 per month). Accordingly, the adjustment in income limits in 2026 equates to an approximate monthly benefit increase of $45 for this hypothetical retiree, in addition to any cost-of-living adjustments implemented for the year. Such increments collectively represent a meaningful increase in disposable income.
It is important to emphasize that any Social Security benefits withheld due to earnings prior to reaching full retirement age are not lost permanently. Upon attaining the FRA, the Social Security Administration conducts a recalculation of benefits to credit for previous withholdings. Following this recalibration, beneficiaries typically receive increased monthly payments, with work-related income no longer influencing benefit amounts.
For retirees contemplating continued employment, understanding the adjusted income limits and their implications for Social Security benefits can inform financial decision-making. The higher earnings thresholds for 2026 help maximize the retention of benefits while working, complementing the strategy of supplementing retirement income through employment beyond the initial retirement age.