Millions of Social Security recipients could see higher monthly payments under a new proposal introduced by Republican lawmakers. The plan targets a long-standing rule that reduces benefits for people who claim Social Security early while continuing to work. Supporters say eliminating that rule would give retirees more flexibility and clarity about how working affects their benefits.
In April, Sen. Rick Scott of Florida and Rep. Greg Murphy of North Carolina introduced the Senior Citizens’ Freedom to Work Act. The bill would repeal the Social Security Retirement Earnings Test, a policy that temporarily withholds part of a beneficiary’s payments if they earn income above a certain limit before reaching full retirement age.
Lawmakers backing the proposal argue that the rule discourages work and creates confusion for older Americans who want or need to stay employed.
Proposal
The Retirement Earnings Test applies to people who begin collecting Social Security before reaching full retirement age and continue working. Under current law, benefits are reduced if earnings exceed an annual threshold set by the Social Security Administration.
The new bill would eliminate that test entirely. Early retirees would be allowed to earn income without seeing their Social Security checks reduced or withheld, regardless of how much they make.
Rep. Murphy said the policy penalizes seniors who want to work and does not meaningfully protect the long-term finances of the Social Security program.
Current
Under existing rules, the earnings limit is adjusted each year. For 2026, the limit is set at $24,480 for beneficiaries below full retirement age.
If a person earns more than that amount, Social Security withholds $1 in benefits for every $2 earned above the threshold. This reduction continues until the beneficiary reaches full retirement age.
For individuals who will reach full retirement age in 2026, a higher limit applies. They can earn up to $65,160 before benefits are reduced, with $1 withheld for every $3 earned above that level. Once full retirement age is reached, the earnings limit disappears entirely.
Impact
If passed, the proposal would result in larger monthly payments for millions of early retirees who are still working. Instead of seeing part of their benefits withheld, those individuals would receive their full Social Security payment each month while also earning wages or self-employment income.
Supporters say this could especially benefit retirees facing higher living costs or those who choose to remain in the workforce part time.
It is important to note that under current law, withheld benefits are not permanently lost. Once a beneficiary reaches full retirement age, their monthly payment is recalculated to account for benefits that were previously withheld. However, many retirees are unaware of this adjustment and limit their earnings to avoid reductions.
Retirement
Full retirement age depends on a person’s birth year. For today’s retirees, it ranges between age 66 and 10 months and age 67.
Anyone who continues working after reaching full retirement age faces no earnings cap under current law. The proposed legislation would effectively extend that same treatment to people who claim benefits as early as age 62.
Process
The Senior Citizens’ Freedom to Work Act has been introduced in both the House and Senate. It is currently under review in the Senate Committee on Finance and the House Ways and Means Committee.
Like many changes involving Social Security, the bill faces a lengthy legislative process and would require broad support to become law.
Context
Social Security remains a critical source of income for older Americans. Nearly 75 million people receive benefits, including about 54 million retirees. Any proposal that affects benefit calculations has wide-reaching implications, both for individual households and for the program’s finances.
While supporters frame the proposal as a way to modernize retirement rules, critics may raise concerns about long-term funding. For now, the bill represents an early step in a broader conversation about work, retirement, and Social Security in a changing economy.
FAQs
What is the Retirement Earnings Test?
It reduces benefits for early retirees who earn above a set limit.
Who would benefit from this proposal?
Early retirees who work while collecting Social Security.
Are withheld benefits lost forever?
No, they are returned after full retirement age.
Does the earnings limit apply after full retirement age?
No, there is no earnings cap after FRA.
