What Counts as Earned Income (and What Does Not)
The Retirement Earnings Test applies solely to active labor income. The government distinguishes between money you physically work for and passive income from savings or investments.
Gross W-2 wages and net earnings from self-employment count directly toward your annual earnings ceiling. If you perform paid consulting or hourly customer service, that income counts.
Conversely, traditional retirement account distributions do not count against the limit. Withdrawals from 401(k) plans, traditional IRAs, and private pensions remain completely exempt.
Investment yields such as capital gains, corporate dividends, and bank interest do not count either. You can collect significant investment returns without triggering benefit withholdings.
Comparing Benefit Rules: Under FRA vs. Full Retirement Age
Understanding how the rules shift once you turn 67 helps you plan your work schedule effectively. The table below outlines how benefits and earnings interact across both phases.
| Rule or Feature | Under Full Retirement Age (Age 65–66) | At or After Full Retirement Age (Age 67+) |
|---|---|---|
| Annual Earnings Limit (2026) | $24,480 per year ($2,040 per month) | Unlimited earnings allowed |
| Benefit Withholding Rate | $1 withheld for every $2 over the threshold | None ($0 withheld) |
| Year of FRA Milestone Limit (2026) | $65,160 per year (months before birthday) | Not applicable |
| What Income Counts | Gross wages and net self-employment | No earnings are tracked or restricted |
| Recalculation of Benefits | Adjusted upward at age 67 to repay withholdings | Adjusted only if current earnings beat top 35 years |
| FICA Tax Obligations | Mandatory 7.65% (15.3% for self-employed) | Mandatory 7.65% (15.3% for self-employed) |
As the comparison illustrates, reaching age 67 removes the administrative friction between working and receiving monthly benefits.
ok i reached 67 actually 73 now have been working part time continually since so im still adding to my social security does my benefits increase since im still paying in