I'd Think Twice About Claiming Social Security Early if You're Still Working - Here's Why

It's common for seniors to continue working, at least part-time, while at an eligible age for Social Security benefits. And if you're thinking this is a great way to double-dip by getting paid to work and retire, you're right that it can work for some.

However, there's one big consideration that might not be obvious, and that can prevent you from getting all you're owed right now. If you want to keep more of your paycheck and meet your retirement goals, learn about this potential mistake.

The double-hit to income

You might still want to work at retirement age, either because you want to or because you feel you need the cash. But collecting Social Security benefits at the same time can subject you to:

• The retirement earnings test with withheld checks
• A permanent reduction in the base monthly Social Security benefit

Each works in its own way, but both can lower your monthly household income.

How the 2026 earnings test works

The first thing to understand is that the earnings test only applies before full retirement age (FRA). For someone younger than FRA for all of 2026, Social Security withholds $1 for every $2 you earn above $24,480. This is based on annual earnings. It isn't a tax rate.

But if you turn FRA in a calendar year, the earnings limit rises to $65,160 in 2026. Social Security only withholds $1 for every $3 you earn above that amount, but only for earnings before the month the person reaches FRA. In that birthday month, earnings don't reduce benefits, no matter if your birthday is on the 1st or the 30th.

How earnings erase checks

Let's see this earnings test in action. If you're 62 and get $1,500 in monthly Social Security benefits, that's $18,000 for the year. So, if you make $60,000 from a job in that same year, your earnings will be $35,520 over the $24,480 limit. Social Security would withhold $17,760 in benefits using the $1 for every $2 earned rule.

That leaves you with around $240 left after withholding—for the entire year. This is just one example, and your circumstances may be different.

Early claiming also reduces benefits

The earnings test is just one reason a still-working senior may want to wait for benefits. Filing before FRA can permanently reduce the monthly benefit amount.

For someone with an FRA of 67, claiming at 62 is 60 months early. This can reduce the benefit by about 30% compared to waiting. It's a permanent reduction that you won't get back later, with smaller checks for the rest of your life.

An example is a $2,000 monthly benefit for waiting until FRA. By taking it at 62 instead, you'll see just $1,400 monthly benefit payments. That lower starting check is a permanent part of the decision, while the earnings test then temporarily withholds some or all of those already-reduced checks.

Withheld doesn't mean lost

Here's one additional thing to consider. Yes, the benefit reduction for not waiting until FRA is forever. But the withholding from the earnings test isn't a permanent loss. Once you reach FRA, SSA recalculates your monthly benefit and credits back for months you had withholdings. You'll get a higher monthly benefit going forward.

How that money is credited back depends on what was withheld and how your benefits get paid out. It's not usually a $ 1-for-$1 or lump-sum repayment.

What income counts for the earnings test?

One of the reasons you might avoid early claiming is that income from a job can count against you. But it's not the only income you might be receiving at your age. However, the earnings test is about earned income—money you make from a job or self-employment.

It doesn't usually count money from investments, IRA or 401(k) withdrawals, pensions, interest, capital gains, annuity income, or rental income that's not part of self-employment earnings. In this way, a retiree living on investment income and pension may have a very different earnings-test scenario than someone still working a full-time job. SSA classifies each differently.

Bottom line

The combo of withheld benefits and lower monthly checks should have you thinking carefully about claiming Social Security too early. To avoid one of the more surprising retirement mistakes, this may mean waiting just until you stop working, no matter if you've reached FRA.

For others, this means waiting until you're done working and you're age 67 (or even later), since benefit checks can permanently increase until you reach age 70. After that, there's no reason to wait; you'll get the maximum payout for your lifetime of working and won't have an earnings test to worry about. If you're still earning a substantial amount from work, run the numbers before you submit the Social Security application.

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