Claiming Social Security in 2026? What To Do If You’re Still Working
For retirees living on a fixed income, every dollar counts and knowing the ins and outs of Social Security taxation can help keep more money in your wallet. Depending on how much money you earn from work, retirement accounts, investments and other sources, you may have to pay federal taxes on a portion of your benefits.
Here's what retirees need to know about earning money while collecting Social Security and how taxes could affect their benefits, according to experts.
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The Social Security Earnings Test
If you claimed Social Security before your Full Retirement Age (FRA) and you're still bringing in wages or self-employment income, the Social Security Administration (SSA) runs what's called the Retirement Earnings Test. Miss the memo on this one, and you could see less money hit your account than you planned on.
Here's the math for 2026, according to the SSA:
Under FRA for the full year: You can earn up to $24,480 before the SSA starts withholding anything. Above that, they hold back $1 for every $2 you earn over the limit.
The year you reach FRA: The limit jumps to $65,160, and the withholding eases to $1 for every $3 over that amount — but only for the months before you actually hit FRA.
Once you reach FRA: The earnings test disappears entirely. Earn as much as you want; your benefit is safe.
Not sure what your FRA is? Eric Mangold, a certified wealth strategist and the founder of Argosy Wealth Management, suggested skipping the guesswork and creating a free account on SSA.gov, where you can look it up and check your benefit estimates at the same time.
One important note: the earnings test is only applied to certain kinds of income. "It doesn't apply to investment returns," Mangold said — so withdrawals from your 401(k) or IRA don't count against the limit.
How Working Affects Your Taxes
Many retirees assume that having Social Security benefits withheld under the earnings test is the same as paying taxes on those benefits. In reality, these are two separate rules administered by different government agencies.
"The earnings test is the SSA temporarily withholding benefits because your wages exceed the annual limit before FRA," explained Peter Diamond, a federally licensed tax, accounting and real estate professional. "Federal income tax is determined by the IRS based on your taxable income. One affects the timing of your Social Security checks. The other determines whether you owe income tax."
And working can hit you on both fronts. Beyond potentially triggering the earnings test, earning an income can increase the amount of your benefits that are subject to federal income tax.
"Your wages increase your overall income, which can cause a larger portion of your Social Security benefits to become taxable under the IRS combined income calculation," Diamond said. “After determining how much of your Social Security is taxable, you then apply your deductions — including the standard deduction — to determine your final federal tax liability.”
How To Plan Ahead
Do the math before tax season, not after. Diamond's advice: tally up every source of income you expect for the year — wages, retirement withdrawals, investment income, Social Security — and use that to estimate both your federal and state tax liability ahead of time.
"That allows you to adjust your withholding or make estimated tax payments ahead of time instead of getting surprised with a tax bill after you've already spent the money and potentially being subjected to unwanted penalties," Diamond said.
Understanding the difference between the earnings test and IRS tax rules can help retirees make informed decisions about working in retirement and avoid unexpected reductions to their benefits.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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