US Social Security earnings test and COLA concerns impact retirees

Under current Social Security rules, retirees who have not yet reached full retirement age (FRA) may work but face an earnings test. Earnings above $24,480 in a year reduce benefits by $1 for every $2 earned; if the retiree reaches FRA during the year, the threshold rises to $65,160 with a reduction of $1 for every $3 earned. Senators Rick Scott and Rep. Greg Murphy introduced the Senior Citizens' Freedom to Work Act in April 2026, proposing to eliminate the earnings limit so seniors can work without benefit reductions.

The program’s annual cost‑of‑living adjustment (COLA) is calculated from the third‑quarter Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI‑W). A 2.8% COLA was applied for 2025 after the CPI‑W rose 2.76% year‑over‑year. Analysts note that a larger COLA does not always keep pace with current price spikes; for example, a $2,000 benefit increased by $56 may be outweighed by a 7% rise in gas prices. The Senior Citizens League projects a 3.8% COLA for 2027, reflecting persistent inflation, though the official figure will not be released until October.