Retirement Social Security

A New Social Security Bill Could Let Working Retirees Keep More of Their Checks

Working after retirement wouldn't affect benefits.

By David Maina, CPA , Edited by Laura Hohenstein

Updated May 22, 2026

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Working past 62 while collecting Social Security sounds like a reasonable way to stretch your income. But for a lot of retirees, the extra earnings come with a penalty they weren't expecting.

If you earn above a certain threshold before full retirement age (FRA), the government can withhold part of your benefit check, sometimes cutting into a retirement plan that depended on both income streams.

A bill introduced in Congress earlier this year would eliminate that penalty entirely. Whether it passes is another question, but the proposal is worth understanding if you're anywhere near the earnings limit.

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How the earnings test works now

In 2026, if you've claimed Social Security before full retirement age (generally 66 to 67, depending on your birth year), the withholding kicks in at $24,480 in annual earnings.

For every $2 you earn above that, $1 of your benefit is withheld. A higher limit of $65,160 applies in the calendar year you reach full retirement age, with $1 withheld for every $3 above that amount.

The withholding isn't permanent, though. Once you reach full retirement age, Social Security recalculates your monthly benefit to account for every dollar that was held back. Your future checks go up to compensate, and over a full retirement, you're expected to get roughly the same total amount either way.

But if you need the money now, getting it back years later doesn't help much, especially when the penalty already feels like a 50% tax stacked on top of regular income and payroll taxes.

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What the bill would change

The Senior Citizens' Freedom to Work Act of 2026, introduced by Rep. Greg Murphy in the House and Sen. Rick Scott in the Senate, would eliminate the earnings test entirely. Retirees who claim Social Security before full retirement age would keep their full benefit check regardless of how much they earn.

The bill has bipartisan co-sponsors, and Congress has done something similar before. In 2000, lawmakers unanimously removed the same type of penalty for people at or above the old retirement age of 65.

Supporters of the current bill say the earnings test was designed during the Great Depression to push older workers out of the labor force, and that it doesn't make sense anymore when roughly one in five Americans over 65 is still working.

If passed, the change would take effect for tax years ending after 2026, which in practice means 2027. Anyone earning income in 2026 would still be subject to the current rules.

The retirees most likely to benefit

The bill is aimed at people between 62 and full retirement age who are collecting Social Security while still earning income. Once you reach full retirement age, the earnings test no longer applies anyway, so this change wouldn't affect anyone 67 or older.

The people who would feel the difference most are those earning modestly above the threshold. A 64-year-old making $30,000 a year, for instance, would no longer lose $2,760 in annual benefits.

For someone on a tight budget trying to cover bills with a part-time job and Social Security combined, keeping that money could be the difference between staying afloat and falling short every month.

The change could also make it easier for employers to hire and retain older workers, since neither side would need to worry about benefit reductions tied to extra hours or higher pay.

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What the bill doesn't change

Eliminating the earnings test would remove a frustrating penalty, but it wouldn't change several other rules that affect your benefits.

For instance, claiming Social Security early still permanently reduces your monthly check. If you claim at 62 instead of 67, your monthly check is still roughly 30% lower for life.

With the penalty gone, more people might be tempted to file early, but that permanent reduction would still apply. Some researchers have flagged this as a concern, noting that easier early access could lead more retirees to lock in a smaller benefit than they would have otherwise.

The bill would also do little for Social Security's broader funding picture. More working retirees would mean slightly more payroll tax revenue flowing in, but the effect is small. Everything else about the system, from how your benefit is calculated to what you owe in taxes, would work the same way it does now.

Bottom line

The bill is not a guarantee of more money over your lifetime, since the current withholding is eventually returned through higher checks later. But for working retirees who need that income now rather than years down the road, the relief would be immediate.

If this bill passes, fewer people would have to choose between staying on the job and protecting their monthly check, which is a reasonable step toward a more stress-free retirement.

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