Reaching your early sixties, choosing to continue working and paying taxes on each paycheck, and then seeing your Social Security benefits gradually decline as a result is almost ironic. It occurs more frequently than most people realize, and for years it has caused low-level annoyance among senior employees who believe they are being punished for carrying out their duties exactly as they should.
The Retirement Earnings Test, or RET, is the regulation that governs this. It was put into place during the Great Depression with the intention of encouraging older workers to retire and creating jobs for younger Americans who were having difficulty finding employment. That was 1930s reasoning for a 1930s emergency. It’s more difficult to understand why the rule has persisted for so long, largely unaltered, in a time when people are living longer, working later, and actually need both their income and their benefits to get by.
In 2026, the RET operates in a simple, if somewhat annoying, manner. The Social Security Administration deducts $1 for every $2 you make over your full retirement age, which is 67 for those born after 1960, if you claim Social Security before then and your annual income exceeds $24,480. The threshold increases dramatically to $65,160 as you approach full retirement age, with $1 withheld for every $3 earned. The cap completely vanishes once you reach full retirement age. You can make as much money as you want.
This has a subtlety that is frequently overlooked in discussions. The benefits that were withheld are not permanently lost. Social Security increases a person’s monthly payment after they reach full retirement age in order to make up for the months when their benefits were lowered. Therefore, the math can theoretically balance out over a sufficiently long period of time. However, “theoretically over time” does not cover rent in the interim. Having checks withheld for months causes actual and immediate financial strain for early retirees who specifically requested benefits because they needed them, whether because of health issues, layoffs, or caregiving obligations.
This discrepancy between the rule’s actual application and its theoretical implementation may have been the driving force behind lawmakers’ decision to take action. The Senior Citizens’ Freedom to Work Act, a bill that would completely repeal the RET, was introduced in April by North Carolina House Representative Greg Murphy. In the Senate, Senator Rick Scott of Florida then introduced companion legislation. Murphy was straightforward in his reasoning, contending that the earnings test primarily acts as a bureaucratic roadblock for individuals who merely wish to work and receive the money they have already contributed to Social Security and does nothing to improve the program’s finances.
Early retirees, or those between 62 and full retirement age, would be able to earn any amount under the proposal without having their benefits reduced. On the surface, it seems like a simple victory for seniors who are employed. And it most likely is in a lot of ways. However, there’s a feeling that the wider ramifications also merit consideration. Even if individual benefits are eventually recovered over time, eliminating the RET may have an impact on Social Security’s short-term cash flow. It’s still unclear how big of an impact that would have because actuaries and policy researchers are still working through the numbers.
It is evident that the rule was designed for a different America. The notion that a sixty-three-year-old who wishes to continue working is somehow stealing a job from a younger person has a very short shelf life, and it was out of date decades ago. Due to the challenging math of inflation, healthcare costs, and retirement savings that didn’t go as far as anticipated, many older workers today are staying in the workforce out of necessity rather than choice.
It’s difficult not to get the impression that there is more to this debate than just one earnings threshold. It’s about whether the laws still reflect what the nation truly thinks retirement should be like for those who built it.
