Your full retirement age determines when your benefits become penalty-free. If you were born between 1943 and 1954, your full retirement age is 66. For those born between 1955 and 1959, the age increases by two months per year. Anyone born in 1960 or later has a full retirement age of 67. The earlier you file, the more your benefit is permanently reduced. If your full retirement age benefit is $2,000 and you file early, your monthly amount drops to $1,760 at 65, $1,520 at 63, and just $1,400 at 62. But reductions aren’t the only thing to watch out for. If you work while collecting early, the earnings test will determine whether you face additional penalties.

For 2026, the lower earnings limit is $24,480. If you make more than that, Social Security withholds $1 for every $2 over the limit. So if you earn $38,000 while collecting early, you exceed the limit by $13,520, and Social Security takes back $6,760 of your benefits. The higher earnings test applies in the calendar year you reach full retirement age. That threshold is much higher $65,160 for 2026 and the penalty is less severe at $1 withheld for every $3 over the limit. Earn $71,000 that year and you’ll lose $2,280 of your benefits. These penalties can surprise a lot of people, especially those easing into retirement with part-time work or consulting income. But here’s the important part: once you reach your full retirement age, the penalties disappear completely. You can earn unlimited income with no reductions to your Social Security benefits.

That’s why knowing the earnings test numbers is so important if you’re still working. The last thing you want is to lose thousands of dollars simply because you didn’t know the rules. If you’re planning to work in your 60s, timing your Social Security correctly can help protect your income, reduce penalties, and strengthen the long-term foundation of your retirement plan.

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