/images/2023/09/14/woman_using_laptop.jpg)
/images/2019/12/06/smart_strategies_to_save_money_on_car_insurance.jpg)
:format(webp)/images/2025/11/12/social-security-graphic.jpg)
/authors/jordan-major-headshot.jpg)
/authors/andrea_basse_headshot.jpg)
Add Us On Google
For millions of Americans nearing retirement, one rule can quietly reduce their Social Security checks, especially if they keep working.
Now, lawmakers are pushing to eliminate that rule altogether. A new bill in Congress would repeal the Social Security "earnings test," a provision that can temporarily reduce benefits for people who claim Social Security before reaching full retirement age while still earning income.
Workers in their early 60s could see more money in the short term if the rule disappears. But the proposal also raises important questions about stress-free retirement planning.
Set up direct deposit - pocket $400
Set up an eligible direct deposit with SoFi Checking and Savings and you could pocket a bonus of up to $400. Make the switch, set up direct deposit, earn the bonus. It basically takes no extra work at all other than following these steps.
Why people are switching: This account earns up to an insane 4.00% APY1 <p>Earn up to 4.00% Annual Percentage Yield (APY) on one SoFi Savings account with a 0.90% APY Boost (added to the 3.10% APY as of 5/28/26) for up to 6 months. Open your first SoFi Checking and Savings account and receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 12/31/26. Rates are variable, subject to change. Terms apply at <a href="https://www.sofi.com/banking/#4">sofi.com/banking#4</a>. SoFi Bank, N.A. Member FDIC.</p> on savings for up to six months (3.10% APY standard + 0.90% APY boost) on top of that $50 or $400 bonus.2 <p>New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more) OR $400 (with at least $5,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more). Cash bonus amount will be based on the total amount of Eligible Direct Deposit received within 25 calendar days of your first Eligible Direct Deposit of $1 or more. If you have satisfied the Eligible Direct Deposit requirements but have not received a cash bonus in your Checking account, please contact us at 855-456-7634 with the details of your Eligible Direct Deposit. Direct Deposit Promotion begins on 5/15/2026 and will be available through 12/31/26. See full bonus and annual percentage yield (APY) terms at <a href="https://www.sofi.com/banking/checking-offer/">sofi.com/banking/checking-offer/</a></p> That's way better than the measly 0.38% APY (as of 06/15/26)3 <p>Based on <a href="https://www.fdic.gov/national-rates-and-rate-caps">this</a> FDIC data, as of 6/15/26.</p> national average savings accounts offer.
No monthly fees and no surprises. Open your account and earn up to a $400 bonus
What the earnings test actually does
The Social Security earnings test applies to people who start collecting benefits before reaching full retirement age, typically between 66 and 67, depending on birth year.
If you continue working and earn above a certain income threshold, part of your Social Security benefits is temporarily withheld. In 2026, that threshold is $24,480 for those under full retirement age.
For every $2 earned above that amount, $1 in benefits is withheld. In the year you reach full retirement age, the threshold rises to $65,160, and the formula becomes less restrictive, with $1 withheld for every $3 earned above the limit.
Once you reach full retirement age, the rule disappears entirely, and your benefits are no longer reduced based on earnings.
Retirees view it as a "hidden tax"
Although the earnings test doesn't permanently take away benefits, it often feels like a penalty.
Rachel Greszler, a senior research fellow at a policy organization, described it during a congressional hearing as something many people perceive as a "50% tax" on earnings above the threshold.
That perception comes from how the rule works. Workers see their benefits reduced as they earn more income, even though they've already paid into Social Security throughout their careers.
The key detail many people miss
The withheld benefits aren't gone forever. Once you reach full retirement age, the Social Security Administration recalculates your benefit and gradually pays back what was withheld through higher monthly payments.
However, that doesn't always ease concerns. Critics argue that some retirees may not live long enough to fully recover those withheld benefits, especially if they claim early and have shorter life expectancies.
Resolve $10,000 or more of your debt
National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.4 <p>Please note that all calls with the company may be recorded or monitored for quality assurance and training purposes. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 45% before fees, or 20% including our fees, over 24 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating. "Debt-Free" applies only to enrolled credit cards, personal loans, and medical bills. Not mortgages, car loans, or other debts. Results vary.</p>
Sign up for a free debt assessment here.
What the proposed bill would change
The legislation introduced by Greg Murphy and supported by Rick Scott would eliminate the earnings test entirely.
That would allow Americans to collect Social Security benefits before full retirement age without facing any reduction tied to earned income. In practical terms, it would remove a major financial disincentive for older workers who want or need to stay in the workforce.
More Americans are working into their 60s and beyond. In 2024, nearly one in five Americans age 65 and older were still part of the labor force. Among those ages 55 to 64, the participation rate was even higher.
As Rick Scott noted, the earnings test was originally created during the Great Depression to encourage older workers to leave the workforce and make room for younger workers. With more Americans working later in life, that rationale no longer fits current economic conditions.
Impact on your finances
If the earnings test is repealed, the immediate effect would be straightforward. Workers who claim Social Security early would no longer see their benefits reduced because of earned income. That could mean higher monthly cash flow during a time when many households are balancing work and retirement income.
For someone earning above the current threshold, the difference could amount to thousands of dollars per year in benefits that would otherwise be withheld.
The potential downside
While the change sounds appealing, it's not without risks. One concern is that eliminating the earnings test could encourage more people to claim Social Security earlier than they otherwise would.
That decision has long-term consequences. Claiming benefits early permanently reduces your monthly payment compared to waiting until full retirement age or later.
A report from the Congressional Research Service found that if more people claim early, it could lead to lower lifetime benefits, increasing the risk of financial strain later in retirement, particularly for certain groups like women and older seniors.
Social Security funding impact
The impact on the broader Social Security system appears to be relatively small. According to estimates from the Social Security Administration, eliminating the earnings test could slightly improve the program's long-term funding outlook, reducing its projected shortfall by about 1% starting in 2028.
This means the proposal isn't likely to dramatically change the program's financial trajectory, but it also isn't expected to make it significantly worse.
What you should consider
If you're approaching retirement and still working, the earnings test is an important factor in deciding when to claim Social Security.
Taking benefits early while earning income can reduce your monthly payments in the short term, even if those reductions are later adjusted.
If the rule is eventually repealed, it could simplify that decision by removing one layer of complexity. But the bigger question, when to claim benefits, will still depend on your overall financial situation, health, and long-term plans.
Bottom line
Congress is considering eliminating the Social Security earnings test, a rule that reduces benefits for some early retirees who continue working. If you're trying to supplement your Social Security income, the change could mean more flexibility and a higher income in the near term.
However, it could also encourage earlier claiming decisions that lead to lower monthly benefits over time. Until any changes are finalized, understanding how the rule works and how it fits into your overall retirement strategy remains essential.
More from FinanceBuzz:
- Retire like the rich: 14 ways you could build wealth in your 50s.
- Find out if you could pay less for car insurance in just a few clicks.
- Make these 7 savvy moves when you have $1,000 in the bank.
- 14 moves seniors could benefit from but often forget about.
/images/2021/04/21/adobestock_192812280_1200x628.jpg)
/images/2019/12/06/smart_strategies_to_save_money_on_car_insurance.jpg)
/images/2025/01/28/adobestock_628402894_1.jpeg)
/images/2024/09/04/adobestock_669069249_editorial_use_only_1.jpeg)
/images/2020/03/02/tattoo-woman-bar.jpeg)
/images/2020/12/21/smiling-couple-looking-at-laptop-screen.jpeg)
Intro Offer
INTRO OFFER: Unlimited Cashback Match for all new cardmembers. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300
Annual Fee $0 Why we like it
/images/2025/01/23/discover_it_cash_back_card_art_gold.png)
/images/2025/02/04/person_using_card_in_atm.jpg)
/images/2020/06/29/pensive-woman-looking-at-laptop-screen.jpeg)
/images/2026/07/20/trump-medicare-drug-plan.png)
/images/2024/03/03/woman-with-money.jpg)
/images/2026/03/31/cfpb-paper-american-flag.jpg)
/images/2026/07/14/mark-cuban-health-care-costs.png)
/images/2026/02/11/mark-cuban_1.jpg)
/images/2024/10/14/retired_women_laughing.jpg)
/images/2025/11/26/state_farm_logo_on_phone_and_website.png){kind=logo}
/images/2025/07/09/pumping-gas-at-gas-pump.jpg)
/images/2025/11/19/kevin-oleary-smiling.jpg)
