Congress is actively considering legislation that would eliminate the Social Security earnings test — the rule that temporarily reduces your Social Security benefit if you claim before full retirement age and earn more than a set income threshold. If this bill passes, working retirees under full retirement age could collect their full Social Security check and keep earning a paycheck without any benefit being withheld. It’s one of the most significant potential changes to Social Security in decades, and it could reshape the retirement math for millions of Americans still in the workforce.

What exactly is the Social Security earnings test?

The earnings test is a little-known rule that trips up a lot of people who claim Social Security early — that is, before their full retirement age (currently 67 for anyone born after 1960). Here’s how it works: in 2026, if you’re under full retirement age for the entire year and you earn more than roughly $22,320, Social Security withholds $1 in benefits for every $2 you earn above that limit. In the year you reach full retirement age, the threshold rises and the reduction drops to $1 for every $3 earned over a higher limit. Once you hit full retirement age, the test disappears entirely and your benefit is recalculated upward to credit you for the months that were withheld.

The problem? Many people don’t realize the withheld money comes back eventually. They either stop working unnecessarily, or they feel penalized for being productive. The earnings test was originally designed to preserve Social Security funds and encourage older workers to retire, but critics argue it’s outdated in an era when people are living longer and working well into their 60s.

What would eliminating the earnings test actually change?

If Congress removes the earnings test, anyone who claims Social Security before full retirement age would be free to earn as much as they want from work without seeing a single dollar of their benefit withheld. That’s a big deal for people who need retirement income but also want — or need — to keep working part-time or full-time.

Take a practical example: a 64-year-old who claimed Social Security early at a reduced rate and earns $45,000 a year from a part-time consulting job currently loses a significant chunk of their monthly benefit until they reach full retirement age. Under the proposed change, they’d keep every dollar. That could mean hundreds of extra dollars per month in their pocket right now, when they actually need it.

It’s worth noting that eliminating the earnings test would not change the permanent reduction that comes with claiming early. If you claim at 62, your benefit is still reduced compared to waiting until 67. The earnings test is a separate, temporary mechanism — and lawmakers are targeting that mechanism specifically.

When should you claim Social Security to maximise your benefit?

This is the question that keeps most pre-retirees up at night, and the honest answer is: it depends on your health, your other income sources, and whether the earnings test repeal passes. Here’s the general framework:

  • Claim early (62–64) if you have health concerns, limited savings, or simply need the income now. Your monthly payment will be permanently reduced, but you’ll collect for more years.
  • Wait until full retirement age (67 for most people today) to receive 100% of your calculated benefit — and to make the earnings test a non-issue regardless of what Congress does.
  • Delay until 70 to earn delayed retirement credits worth 8% per year, giving you the largest possible monthly check for the rest of your life. This strategy works best for people in good health who can afford to wait.

If Congress does kill the earnings test, early claiming becomes considerably more attractive for people who are still working. You could collect a reduced but meaningful benefit while your paycheck continues — essentially having both income streams at once.

How much of your Social Security benefit is taxable?

Here’s a surprise that catches many retirees off guard: your Social Security benefit may be partially taxable at the federal level, depending on your total income. The IRS uses a figure called “combined income” (your adjusted gross income, plus any nontaxable interest, plus half your Social Security benefit). If that number lands between $25,000 and $34,000 for single filers, up to 50% of your benefit is taxable. Above $34,000, up to 85% can be taxed. For married couples filing jointly, those thresholds are $32,000 and $44,000. Note that these thresholds have not been adjusted for inflation in decades, meaning more and more retirees find themselves paying tax on Social Security over time.

What are the RMD rules you need to know for 2025 and 2026?

Required minimum distributions (RMDs) are the minimum amounts the IRS forces you to withdraw each year from most tax-deferred retirement accounts — like traditional IRAs and 401(k)s — once you reach a certain age. That age is currently 73, following changes made by the SECURE 2.0 Act. At age 75, the rules remain the same for now, though further changes have been discussed in Congress. Missing an RMD triggers a steep penalty: 25% of the amount you should have withdrawn (reduced to 10% if you correct it quickly). To calculate your RMD, divide your account balance as of December 31 of the prior year by the IRS life expectancy factor for your age. Most major brokerages will do this math for you automatically.

How do you avoid Medicare IRMAA surcharges?

IRMAA stands for Income-Related Monthly Adjustment Amount — it’s the extra premium that higher-income Medicare enrollees pay on top of the standard Part B and Part D premiums. For 2025, the standard Medicare Part B premium is $185 per month. But if your income from two years prior (2023 income affects 2025 premiums) exceeded $106,000 as a single filer or $212,000 as a married couple, you’ll pay a surcharge ranging from a few hundred to over a thousand dollars more per year. Strategies to reduce IRMAA exposure include doing Roth conversions carefully before age 63, managing capital gains realizations, and timing large one-time income events like property sales. If your income dropped significantly due to a life-changing event — retirement, divorce, death of a spouse — you can appeal your IRMAA designation using Form SSA-44.

What’s the bottom line on the earnings test repeal?

The potential elimination of the Social Security earnings test is genuinely good news for working retirees who claimed benefits early. It removes a penalty that many people find confusing and discouraging, and it gives you more flexibility to blend work and retirement income on your own terms. Keep watching this legislation closely — if it passes, it’s worth revisiting your Social Security strategy with a financial advisor, especially if you’ve been delaying work or benefit claims to avoid the earnings test trap.

Stay on top of every development in Social Security, Medicare, and retirement tax rules — without having to sort through the noise yourself.

Frequently Asked Questions

When should I claim Social Security to maximise my benefit?

The optimal claiming age depends on your health, other income, and financial needs. Waiting until age 70 gives you the largest possible monthly benefit thanks to 8% annual delayed retirement credits, while claiming at 62 gives you smaller payments but more years of collection. If Congress eliminates the earnings test, claiming early while still working becomes a much more attractive option.

How much of my Social Security benefit is taxable?

Depending on your total income, between 0% and 85% of your Social Security benefit can be subject to federal income tax. Single filers with combined income above $34,000 — and married couples above $44,000 — may see up to 85% of their benefit taxed. These thresholds have never been adjusted for inflation, so more retirees are affected every year.

What are the RMD rules for 2025 and 2026?

Required minimum distributions must begin at age 73 under the SECURE 2.0 Act rules currently in effect. You calculate your annual RMD by dividing your prior year-end account balance by the IRS life expectancy factor for your age. Missing your RMD results in a penalty of up to 25% of the amount you failed to withdraw.

How do I avoid Medicare IRMAA surcharges?

IRMAA surcharges are triggered when your income from two years prior exceeds certain thresholds — $106,000 for single filers in 2025. You can reduce exposure by managing Roth conversions, timing capital gains carefully, and appealing your IRMAA status if you had a qualifying life-changing event like retirement or the death of a spouse using IRS Form SSA-44.

What is the Medicare Part B premium for 2025?

The standard Medicare Part B premium for 2025 is $185 per month per person. Higher-income enrollees pay additional IRMAA surcharges on top of this amount, which can add hundreds or even thousands of dollars annually depending on their income level from two years prior.