Retirees May Get Larger Social Security Monthly Checks Under New Plan

When you make your retirement plan, you must understand how Social Security fits into it. Social Security replaces about 40% of pre-retirement income, but many factors affect how much you collect.

Unfortunately, one complex rule ends up causing problems for retirees. Many retirees don't understand that this rule sometimes causes them to temporarily lose some or all of their benefits.

The good news is that since the rule is complicated and hard to administer, some lawmakers are hoping to eliminate it by passing a new law called the Senior Citizens' Freedom to Work Act of 2026. The bad news is that the proposed repeal may not pass and, if it does, it may provide extra monthly income temporarily but could actually cost many retirees over the long-run.

Here are the details about how the rule works, the proposed change, how reform could give retirees more benefits temporarily, and what the long-term consequences could be.

How the Social Security earnings test works

The current rule that's causing problems for retirees is the Social Security retirement earnings test (RET), which is also known as the earnings limit. This rule limits how much you are allowed to work while collecting Social Security if you are under your full retirement age. Specifically:

• If you won't reach full retirement age all year and you earn more than $24,480, you lose $1 in benefits per $2 in extra earnings.
• If you are going to reach FRA during the year, but haven't yet, you lose $1 in benefits for every $3 above the limit.

Social Security withholds your benefits based on how much you earn, so you often lose entire payments. This is temporary because your benefits are recalculated at full retirement age to account for the months you received no benefits. You're credited back your early filing penalties for those months, and your future payments are higher because of it.

However, you are still limited in your ability to collect both retirement benefits and a paycheck, which is a problem for seniors who were hoping to get income from both sources.

Lawmakers have a plan to repeal the earnings test

Some lawmakers are pushing to change these rules. The Senior Citizens Freedom to Work Act was introduced by Congressman Greg Murphy, M.D. (NC-03) in the House of Representatives and by Senator Rick Scott in the Senate.

"American seniors' ability to earn income and enjoy the dignity of work should not be penalized by arbitrary parameters to receive Social Security benefits," said Congressman Greg Murphy, M.D. "Current law unnecessarily complicates seniors' right to access the benefits they paid into for the entirety of their careers and must be done away with."

Murphy also said that many retirees don't realize that their benefits are recalculated at full retirement age based on the income they forfeited, so they end up choosing to keep their earnings lower when they otherwise would have preferred to work.

How the repeal could hurt seniors over the long-term

Since the work limits are confusing and cause hardship for seniors who need a paycheck and Social Security, there's a solid argument in favor of repeal.

However, research has shown that if the retirement earnings test were eliminated, more people would claim Social Security before full retirement age. This would lead to more people getting hit with early filing penalties that affect their lifetime income.

And since the earnings test would no longer result in benefits being withheld and income increasing later, all of those individuals who claimed early are going to end up getting much smaller monthly Social Security benefits for life. Women and older retirees would be hit especially hard by this change.

"This permanent reduction, cemented further without a later RET readjustment, is the cause for poverty concerns later in a beneficiary's life, particularly at older ages," a report from the Congressional Research Service warns.

How likely is it that the new law passes?

The future of the Senior Citizens Freedom to Work Act is uncertain. Congress did change the earnings test in 2000, eliminating it for workers above their full retirement age. That modification was bipartisan and signed into law by President Bill Clinton.

However, there are already concerns about Social Security's trust fund running dry. Paying more benefits to younger retirees who are working while collecting Social Security could lead to the program's shortfalls growing even bigger in the short-term.

And while proponents of the bill say that the long-term effects could be positive because more tax revenue is generated by keeping people working longer, the short-term concerns are very real as the trust fund is on track to be depleted as early as 2032.

Regardless of which side of the argument you believe, the bill has a long road ahead as it's only just been introduced, and it faces an uphill battle in an age where lawmakers are deeply conflicted over Social Security fixes.

Bottom line

The fact remains that right now, the work limits remain the law of the land. Seniors need to be aware of and plan for that because not doing so could be a serious financial mistake that leaves them without the funds they need for a secure retirement.

If you are collecting Social Security benefits and are thinking about working, or if you are hoping to collect benefits from both Social Security and work in the future, you need to understand how the earnings limit is going to affect you before you agree to bring home a paycheck