If you choose to claim benefits before your full retirement age and continue to work, the SSA will claw back your benefits if your active earned income exceeds an annual threshold:
For years prior to the year you reach FRA, the SSA reduces your benefit by $1 for every $2 you earn above the limit (capped at $23,400 in 2026).
In the year you reach FRA, the limit increases significantly (to $62,160 in 2026), and the clawback drops to $1 for every $3 earned above the limit. This applies only to earnings in the months leading up to your FRA birthday.
This reduction is not a permanent tax. When you reach FRA, the SSA recalculates your benefit upward, crediting you for the months your benefits were withheld. Furthermore, your additional working years are factored into your 35-year wage history, which may boost your PIA.
The clawback applies strictly to active earned income (W-2 wages or net self-employment profits, including bonuses and commissions). It does not apply to passive income: interest, dividends, capital gains, pensions, or IRA distributions will not trigger a reduction in your benefits.