As most Americans know, Social Security is a federal program that provides partial income replacement for individuals who retire or become disabled. It serves as a vital financial support system for millions of Americans during their retirement years.
People can begin collecting retirement benefits from Social Security as early as age 62.
Personal finance bestselling author and radio host Dave Ramsey emphasizes that Americans can continue to work while receiving Social Security. Still, there are some key aspects of the program that people need to know about.
If one continues to work and has no plans to retire soon, it’s essential to understand how employment affects Social Security benefits, Ramsey explains. It is possible to receive retirement benefits while still working, but the timing of when a person claims those benefits influences the amount they receive.
“Unfortunately, if you do decide to keep working while collecting early retirement benefits, that could lower the amount of your retirement benefit,” Ramsey wrote. “You see, there’s an income threshold for workers who collect Social Security benefits, and if your income is above that threshold, you’ll get a smaller monthly benefit.”
Ramsey, AARP explain the Social Security income threshold
Social Security enforces an earnings limit for individuals who begin collecting benefits before reaching full retirement age (FRA), which is 67 for people born in 1960 or later.
This earnings limit is adjusted annually to reflect changes in average wages, the AARP explains.
In 2026, individuals who won’t reach FRA that year will have $1 deducted from their benefits for every $2 earned above $24,480 — an increase from the $23,400 limit in 2025. For instance, someone earning $40,000 in 2026 would see their benefits reduced by $7,760, which is half the amount their income exceeds the threshold.
Related: Dave Ramsey, AARP warn on Medicare; 2026 changes coming
“Keep in mind that not all income counts toward your limit, only earnings from work,” Ramsey wrote. “Income from other government or military retirement benefits, investment earnings, interest, pensions, annuities and capital gains, for example, aren’t counted against your limit.”
Ramsey clarifies that those reduced benefits will not be lost forever.
“They’re just being held back by the government for now,” Ramsey wrote. “Those withheld benefits will be returned to you once you reach full retirement age. At that point, Social Security will re-run your numbers and increase your monthly benefit to make up for the earlier reduction.”
AARP outlines the Social Security earnings test at FRA
- In the calendar year you reach full retirement age (FRA), Social Security applies a more lenient earnings test.
- In 2026, until the month you attain FRA, $1 in benefits is withheld for every $3 earned above $65,160, which is an increase from the $62,160 threshold in 2025.
- Once you reach FRA, the earnings test no longer applies. Social Security stops deducting benefits regardless of your income level, and your monthly payment is recalculated to gradually reimburse the amount previously withheld.
- Individuals receiving Social Security Disability Insurance (SSDI) are subject to separate income rules. Because SSDI is designed for those who cannot work due to a significant medical condition, benefits may be discontinued if earnings meet the criteria for “substantial gainful activity” as defined by the Social Security Administration.
- In 2026, the substantial gainful activity threshold is $1,690 per month for most SSDI recipients, up from $1,620 in 2025.
- SSDI beneficiaries who qualify due to blindness have a higher monthly earnings limit of $2,830 in 2026, compared to $2,700 in 2025.
Ramsey recommends taking Social Security early
Claiming Social Security benefits before full retirement age can be a smart move in certain situations, Ramsey suggests.
It may be especially beneficial for individuals facing health challenges in retirement or those who do not depend on the benefits for daily living expenses and have the ability to invest the funds.
Starting benefits early provides immediate financial support and may allow a person to make the most of their lifetime benefits while they’re still able to use them.
“If you do need Social Security benefits for everyday living expenses — and you’re in good health — we think your best bet is to wait and keep working,” Ramsey wrote.
“Remember, Social Security is like the dessert to your main course — it’s the added bonus, not your complete retirement plan.”
Related: Dave Ramsey sends blunt warning to Americans on Medicare
