Bill in Congress Would End Social Security's Earnings Penalty for Working Retirees
🤖 AI Generated ImageA bipartisan bill introduced in Congress this spring would eliminate a Social Security provision that reduces benefits for retirees who continue working before reaching full retirement age.
The legislation, called the Senior Citizens' Freedom to Work Act of 2026, is currently in committee and has not been voted on.
What the Retirement Earnings Test Actually Does
Under current law, workers who begin collecting Social Security before reaching their full retirement age face a reduction in benefits if their income exceeds certain thresholds.
For 2026, the limit for those under full retirement age for the full year is $24,480. For every $2 earned above that, the Social Security Administration withholds $1 in benefits.
For those who reach full retirement age during 2026, the limit rises to $65,160, with $1 withheld for every $3 earned above that threshold — and only for earnings prior to the month they reach full retirement age. Once full retirement age is reached, the earnings test disappears entirely. According to the SSA's official COLA guidance, withheld benefits are also recalculated and restored over time once full retirement age is reached — but many recipients don't know that, which affects how they respond to the rules.
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What the Bill Would Change
The Senior Citizens' Freedom to Work Act of 2026, introduced by Sen. Rick Scott (R-Fla.) in the Senate on March 24 and Rep. Greg Murphy (R-N.C.) in the House on April 16, would repeal the retirement earnings test entirely.
Under the proposal, individuals collecting Social Security before full retirement age could earn any amount without having benefits reduced.
Speaking at a Senate aging committee hearing on March 25, Scott described the provision as penalizing seniors who want to stay in the workforce. Murphy called the retirement earnings test "a bureaucratic hurdle that does more harm than good" and said current law unnecessarily complicates seniors' access to benefits they paid into throughout their careers, according to Fox Business. The Society for Human Resource Management (SHRM) has been actively advocating for revisiting the earnings test, with SHRM CEO Johnny C. Taylor Jr. testifying at the same Senate hearing.
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🤖 AI Generated ImageThe Arguments For — and Against
Supporters of repeal argue the test was created in 1935, when the goal was to push older Americans out of the workforce to free up jobs for younger workers during the Great Depression. That context no longer applies, and the test now discourages continued employment by workers who need income to cover rising living costs.
Rachel Greszler, senior research fellow at the Plymouth Institute for Free Enterprise, testified that the test is "little known and often misunderstood" — and that most people perceive it as a permanent tax rather than a temporary withholding, causing some to reduce their earnings or stop working entirely without realizing the withheld benefits are eventually returned.
The test also costs the SSA $70 million per year to administer, according to Greszler's testimony, and can trigger improper payments. Those concerned about Social Security's solvency have raised a separate question: eliminating the test would accelerate benefit payments to early retirees, which could increase the program's near-term costs. According to CNBC's coverage of the bill, analysis of the long-term fiscal impact is ongoing, with the bill still referred to committee.
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Where the Bill Stands
The Senate version was referred to the Senate Committee on Finance. The House companion was referred to the Committee on Ways and Means.
Neither chamber has scheduled a floor vote.
The retirement earnings test has been the subject of repeated repeal proposals over the years — Congress actually eliminated the test for workers over 65 in 2000, which is why the current rules only apply to those below full retirement age. Whether the same political will exists to extend that change to early retirees remains the open question the bill has not yet resolved.
Key Takeaways
- The Senior Citizens' Freedom to Work Act of 2026 would eliminate the Social Security retirement earnings test for workers below full retirement age.
- Currently, workers under full retirement age face a $24,480 annual earnings limit in 2026, with $1 withheld per $2 earned above that threshold.
- The bill was introduced by Sen. Rick Scott (R-Fla.) on March 24 in the Senate, and Rep. Greg Murphy (R-N.C.) on April 16 in the House.
- The retirement earnings test was created in 1935 during the Great Depression and costs the SSA $70 million per year to administer.
- SHRM and several retirement policy researchers support repeal; concerns about Social Security solvency remain a counterargument.
- The bill is currently in committee in both chambers — no floor vote has been scheduled.
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Business & Finance Editor
Sarah Collins reports on markets, Wall Street, corporate news, and the global economy. She specializes in making financial news accessible to everyday readers.
