More than 11 million Americans over age 65 are currently collecting Social Security while still working, and a new bill in Congress wants to make sure none of them lose a dime of their benefits for doing so. The Senior Citizens' Freedom to Work Act would eliminate the retirement earnings test, the rule that currently claws back benefits from seniors who earn above a certain threshold before reaching full retirement age.
The bill was introduced by Sen. Rick Scott of Florida and Rep. Greg Murphy of North Carolina, according to Cleveland.com. Scott formally announced the measure during a March 25 hearing before the Senate Special Committee on Aging, and Murphy introduced the companion House bill on April 16. The legislation would let seniors continue earning income without having their Social Security benefits reduced.
Under current rules, the government withholds $1 in benefits for every $2 a beneficiary under full retirement age earns above $24,480 this year. For people reaching full retirement age in 2026, the penalty is lighter, $1 withheld for every $3 earned, but only after they clear a separate, higher threshold of $65,160 for the year before that age is reached. Full Retirement Age itself now sits at 66 years and 10 months for people born in 1959, per the Social Security Administration, and rises to 67 for everyone born in 1960 or later.
Why Scott Says the Penalty Is Outdated
Scott has argued the earnings test was passed during the Great Depression to push older Americans out of the workforce and free up jobs for younger workers, a rationale that no longer fits today's labor market. “Retirement does not have to be the end of a person's career,” Scott said, framing it instead as the start of a purpose-driven chapter. He added that seniors can use retirement to pursue new goals and dreams.
That framing lines up with testimony from Society for Human Resource Management CEO Johnny C. Taylor Jr., who told Congress in March that workforce participation among Americans 65 and older grew from 12% in 1994 to nearly 20% in 2026. Taylor discussed the earnings test and its effect on work incentives, according to SHRM. Roughly 20% of people over 65 continue working today, per the Bureau of Labor Statistics.
The Money Isn't Actually Gone, Just Delayed
One of the most misunderstood parts of the current system is that withheld benefits aren't lost forever. Beneficiaries affected by the retirement earnings test receive credits for the months their benefits were withheld, and the Social Security Administration automatically recalculates their monthly check once they hit full retirement age. That recalculation quirk is exactly why the Committee for a Responsible Federal Budget says repealing the test would close only about 1% of Social Security's 75-year financial shortfall, since the money is eventually returned to beneficiaries rather than permanently saved by the program, according to a Committee for a Responsible Federal Budget analysis.
Even so, the psychological effect of watching a check shrink in real time appears to discourage people from working at all. The Economic Policy Innovation Center found the earnings test creates perceived effective marginal tax rates as high as 84% for working early retirees, according to its 2026 analysis. Researchers there argue removing the test could bring up to one million older workers back into the labor market.
A Precedent From Two Decades Ago
Congress has been here before. In April 2000, President Bill Clinton signed the original Senior Citizens' Freedom to Work Act after it passed the House 419–0 and the Senate 100–0, eliminating the earnings test for beneficiaries who had already reached full retirement age. That law never extended the same relief to early retirees between age 62 and full retirement age, which is the gap the 2026 proposal is now aimed at closing.
The current push also comes as rising costs squeeze retirees generally. The average monthly Social Security benefit for retired workers reached $2,086, or $25,032 a year, as of July, leaving a roughly $7,400 annual gap compared to the average basic senior cost of living of $2,700 a month, according to 24/7 Wall St. Nearly half of retirees report higher-than-expected living costs, and 19% describe themselves as financially struggling, per the same report.
Where the Bill Stands Now
The Senior Citizens' Freedom to Work Act was referred to the House Ways and Means Committee following its April introduction. Federal labor projections show workers 55 and older are already the fastest-growing segment of the U.S. labor force, with participation among people 75 and older expected to expand at the highest rate over the coming decade, a trend employers facing worker shortages are increasingly counting on to retain experienced staff.
