Key Points
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People who claim Social Security prior to full retirement age are subject to an earnings test if they work.
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Exceeding the earnings-test limit could mean having some Social Security withheld.
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Make sure you know the rules before you claim Social Security early.
If you were born in 1960 or later, once you turn 67, you’ll reach full retirement age and become eligible for your Social Security benefits without a reduction. But a lot of early retirees don’t wait that long.
Social Security benefits become available at age 62. If you’re retiring early, you may decide to claim Social Security ahead of full retirement age so you’re able to cover your costs. And you may need to claim Social Security early if you don’t have much or any savings for retirement.
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Social Security cards.
Image source: Getty Images.
If you’re an early retiree who’s claimed Social Security prior to full retirement age, you should know that you’re allowed to earn money from a job while collecting benefits. But you’ll also, in that case, be subject to an earnings test. And it’s important to know how it works.
The ins and outs of Social Security’s earnings test
Social Security’s earnings test applies to beneficiaries who haven’t reached full retirement age. It sets limits on how much you can earn each year before having benefits withheld.
In 2026, you’ll have $1 in Social Security withheld per $2 of earnings beyond $24,480 if you won’t be reaching full retirement age at any point. If you will be reaching full retirement age by the end of the year, the formula loosens up quite a bit. In that case, you’ll have $1 in Social Security withheld per $3 of earnings beyond $65,160.
If you have benefits withheld due to exceeding the earnings-test limit, that money will be paid back to you. Once you reach full retirement age, the Social Security Administration will recalculate your monthly benefits and start sending you larger monthly checks.
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However, when you claim Social Security ahead of full retirement age, your monthly benefits are generally permanently reduced. There’s little sense in taking that hit if you’re looking at withheld benefits anyway.
It’s important to know the rules
It’s crucial to read up on Social Security’s rules regardless of when you’re thinking of claiming benefits. But it’s especially important to understand how the earnings test works if you’re subject to it.
Furthermore, if you’re thinking of retiring early and haven’t yet claimed Social Security, you may want to hold off if your intent is to continue working in some capacity. If you expect to earn a generous income, it could leave you with very little Social Security each month, rendering an early claim a pretty big waste.
At the very least, in that situation, see what the earnings-test limit is the year you’re thinking of taking benefits. If you expect your wages to exceed it, that’s reason enough to wait.
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