Social Security Earnings Limits 2026: What Changed and Who’s Affected
Starting January 2026, Social Security will let working retirees earn slightly more before benefits are reduced, but it’s also ending the monthly earnings test, a key safeguard for first-year retirees. This change affects anyone planning to retire mid-year, work part-time, or phase into retirement while collecting benefits. Final figures were confirmed when the Social Security Administration (SSA) released its 2026 updates on October 24, 2025.
- Higher Earnings Limits: The annual threshold for workers under full retirement age rises from $23,400 (2025) to an estimated $24,360 in 2026; the limit for those reaching full retirement age increases to about $64,800, per SSA projections.
- Monthly Test Eliminated: The special monthly earnings test, which let new retirees avoid penalties for low-income months – ends in 2026. All annual income will now count toward the yearly limit.
- Who’s Most Affected: Mid-year retirees, seasonal workers, and part-time earners who once relied on the monthly rule to protect benefits during transition months.
- Other 2026 Adjustments: Full retirement age (FRA) officially reaches 67 for those born in 1960 or later; payroll tax cap rises to roughly $183,600; and a 2.7% cost-of-living adjustment (COLA) is projected.
- Planning Tip: If retiring mid-year, consider delaying benefit claims until January 2027 or FRA to avoid temporary reductions. Use my Social Security to model scenarios.
Millions of Americans who work while collecting Social Security will see major changes in 2026. The new year brings slightly higher income thresholds before benefits are reduced, but it also removes one of the most flexible rules for new retirees, the monthly earnings test. This change affects anyone planning to retire mid-year or continue working part-time while drawing benefits.
In short, you’ll be able to earn more before your benefits are reduced, but you’ll lose a valuable safeguard that once protected first-year retirees from penalties during months of low income. Understanding the balance between these two adjustments is essential for making smart retirement decisions.
Understanding the 2026 Earnings Limits
Each year, the Social Security Administration (SSA) adjusts its annual earnings limits to reflect average wage growth. In 2026, these thresholds are expected to rise modestly, giving retirees who continue working slightly more flexibility before their benefits are reduced.
For individuals under full retirement age for the entire year, the annual earnings limit will increase from $23,400 in 2025 to an estimated $24,360 in 2026. Any income above this amount will reduce your benefits by $1 for every $2 earned over the limit, as outlined in the SSA’s official guide, How Work Affects Your Benefits.
If you reach full retirement age in 2026, the higher earnings limit is projected to increase from $62,160 in 2025 to roughly $64,800. During this transition year, the SSA deducts $1 for every $3 earned above that threshold, but only until the month you reach full retirement age.
Once you’ve reached full retirement age, there are no earnings restrictions. You can work and earn any amount without losing any portion of your monthly Social Security benefits.
Although these increases may seem modest, they offer meaningful breathing room for Americans balancing part-time work with retirement income. Final 2026 limits will be confirmed when the SSA publishes its official update later in 2025.
How the New Earnings Rules Work in Practice
Imagine a 64-year-old retiree receiving $1,500 per month (or $18,000 annually) in Social Security benefits. If they earn $30,000 in 2026, they’ll exceed the estimated $24,360 annual earnings limit for individuals under full retirement age.
| For people younger than full retirement age during the whole year |
||
|---|---|---|
| If your monthly Social Security benefit is |
And you earn | You’ll receive yearly benefits of |
| $700 | $23,400 or less | $8,400 |
| $700 | $24,000 | $8,100 |
| $700 | $26,000 | $7,100 |
| $900 | $23,400 or less | $10,800 |
| $900 | $24,000 | $10,500 |
| $900 | $26,000 | $9,500 |
| $1,100 | $23,400 or less | $13,200 |
| $1,100 | $24,000 | $12,900 |
| $1,100 | $26,000 | $11,900 |
Under current Social Security Administration (SSA) rules, every dollar earned above the limit reduces benefits by $1 for every $2. In this case, the retiree earns $5,640 over the limit, resulting in a $2,820 benefit reduction, roughly equal to two months of withheld payments.
However, the good new is this withheld money isn’t lost. Once you reach your full retirement age (FRA), the SSA recalculates your benefit to credit you for the months your payments were withheld. That means your monthly check will increase slightly for the rest of your life, helping you recover the lost value over time.
While the $24,360 figure is still an estimate based on projected 2026 adjustments, the principle remains the same: earning above the annual threshold temporarily reduces your payments but boosts your long-term benefit once you reach FRA.
The Hidden Rule Change: Monthly Earnings Test Eliminated
The biggest Social Security shift taking effect in 2026 is the end of the monthly earnings test, a rule that previously helped first-year retirees avoid losing benefits if they stopped working mid-year.
Before 2026, the special monthly rule allowed retirees to receive full benefits for any month they earned below a set threshold, even if their total income earlier in the year exceeded the annual earnings limit. In 2025, that monthly threshold is $1,950, according to the Social Security Administration. For example, someone who retired on October 30, 2025 after earning $45,000 through October could still collect full benefits for November and December as long as their monthly earnings were under $1,950.
Starting in 2026, that grace period disappears for new beneficiaries. The monthly test will no longer apply, and only the annual earnings limit, projected at $24,360, will determine benefit reductions, as outlined in the SSA’s earnings test guidance. This means all income earned during the year, even before you retire, will count toward that annual limit. If you retire mid-year after exceeding the threshold, your benefits will be temporarily reduced, even for months after you stop working.
This rule change will especially impact those with seasonal or variable income, who previously relied on the monthly test to qualify for full payments in low-earning months. The withheld benefits aren’t lost; once you reach full retirement age, the SSA recalculates your payment to restore the value of those months, but the adjustment may take time to appear.
Who Will Be Most Affected
This change will primarily affect workers who:
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Retire mid-year after earning a full-time salary earlier in the year.
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Have irregular or seasonal income that fluctuates from month to month.
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Transition gradually from full-time to part-time work.
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Previously relied on the special “grace year” rule to start collecting benefits immediately after retirement.
Under the new rules taking effect in 2026, the monthly earnings test will be eliminated, meaning retirees will no longer be evaluated month-by-month during their first year of retirement. Instead, all income earned within the year, even before claiming benefits, will count toward the annual earnings limit.
As a result, mid-year retirees or those with variable incomes could lose several months of payments that would have been fully protected under the prior monthly test. This shift will hit hardest for individuals who stop working late in the year or whose income is concentrated in certain months, as their total yearly earnings will exceed the limit even if they earn little after retiring.
What Counts as “Earnings” — and What Doesn’t
Remember – not all income counts toward Social Security’s earnings test. The SSA only considers earned income, meaning wages from employment or net income from self-employment.
Pensions, annuities, investment dividends, interest, capital gains, and withdrawals from 401(k) or IRA accounts do not count as earnings. Likewise, government benefits such as unemployment or veterans’ payments are also excluded.
Timing matters, too. If you’re an employee, your earnings are counted when they are earned, not when they are paid. So, if you receive a bonus or unused vacation payout after retirement but earned it beforehand, it doesn’t count toward your limit. For self-employed individuals, income counts when it is received.
Other Social Security Changes Taking Effect in 2026
Full Retirement Age Reaches 67
For those born in 1960 or later, the full retirement age (FRA) officially becomes 67 in January 2026, completing a transition that began with the 1983 amendments. Retiring earlier is still possible at age 62, but doing so results in a larger permanent reduction in monthly benefits, about 30 percent less than if you wait until FRA, according to recent SSA guidance.
Higher Social Security Tax Cap
The maximum amount of earnings subject to Social Security payroll taxes will rise from $176,100 in 2025 to roughly $183,600 in 2026, based on projections from the Social Security Board of Trustees. That means high earners will pay up to $465 more in payroll taxes next year before reaching the income ceiling (6.2 percent × $7,500 increase).
Cost-of-Living Adjustment (COLA)
Beneficiaries are expected to receive an estimated 2.7 percent COLA in 2026, reflecting moderate inflation. Due to the recent federal shutdown, the official announcement, normally released in mid-October, has been delayed until October 24, 2025. For the average retiree receiving $2,000 per month, that would mean about $54 more per month, or $648 per year. This figure remains a projection until confirmed by the Social Security Administration.
Work Credit Threshold Increase
The amount of earnings needed to earn one work credit, used to determine eligibility for Social Security benefits, will increase slightly in 2026 to reflect national wage growth. In 2025, one credit equals $1,810 in earnings; this is expected to rise modestly next year, though the SSA has not yet released the official figure. Workers need 40 credits (roughly 10 years of work) to qualify for retirement benefits.
Planning Strategies for Retiring in 2026
Working while receiving benefits can still make financial sense, but planning ahead is critical.
For retirees already collecting benefits, estimate your 2026 earnings early and compare them to the annual limit. If you’re close to exceeding it, consider adjusting your work schedule or delaying bonuses until the following year. Remember, withheld benefits are later restored at full retirement age.
If you’re planning a mid-year retirement, take extra care. The monthly earnings test will no longer protect you from reductions, so it may be wiser to delay claiming benefits until January 2027 or until you reach your full retirement age. Waiting a few extra months could prevent several thousand dollars in temporary benefit loss.
For all retirees, keeping detailed records of income timing and promptly reporting changes to SSA can help avoid overpayment or underpayment issues. Consulting a certified financial planner familiar with Social Security claiming strategies can also provide personalized guidance.
The Bigger Picture
The elimination of the monthly earnings test marks one of the most significant adjustments to how Social Security calculates benefit reductions for working retirees in recent years. While the system continues to reward delayed claimingthrough higher monthly benefits after full retirement age, it’s becoming less flexible for those transitioning gradually from work to retirement.
These changes are part of Social Security’s broader effort to align benefit rules with inflation, wage growth, and shifting demographics while preserving long-term solvency. Retirees who understand how these updated earnings rules work, and time their claims and income accordingly, will be best positioned to maximize their lifetime benefitsunder the evolving system.
When to Expect Final 2026 Announcements
The Social Security Administration (SSA) typically releases its official updates for earnings limits, the cost-of-living adjustment (COLA), and the taxable maximum each October. However, due to the 2025 federal government shutdown, this year’s announcement has been postponed until October 24, 2025.
The figures referenced here are based on projections from the Social Security Board of Trustees and are expected to closely align with the official numbers once published.
Where to Get Reliable Help
To verify your specific situation or plan ahead for 2026:
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Visit the official SSA.gov website for calculators and planning tools.
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Call 1-800-772-1213 (TTY 1-800-325-0778) to speak with a representative.
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Create a my Social Security account to review your earnings history and estimated benefits.
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Consult a retirement-focused financial advisor for a customized claiming and income strategy.
Final Takeaway
Social Security’s 2026 changes will reshape how retirees plan and claim benefits. The end of the monthly earnings test removes an important cushion for new retirees, but higher earnings limits, an inflation-adjusted COLA, and clear eligibility thresholds also offer new opportunities for strategic planning.
Whether you’re approaching retirement or already receiving benefits, understanding these shifts now will help you make informed, confident decisions, ensuring your Social Security income supports your lifestyle for years to come.
For a full overview of Social Security benefits, rules, and common questions, see our Social Security Explained guide.
