A Bold Plan to Boost Social Security Growth

The Case for Reforming Social Security’s Retirement Earnings Test

Sen. Rick Scott’s (R-FL) Senior Citizens’ Freedom to Work Act of 2026 presents a rare opportunity for bipartisan agreement on Social Security reform. This proposal aims to eliminate the retirement earnings test, which has long been a source of controversy and inefficiency within the Social Security system. By doing so, it could bring significant economic benefits, expand the workforce, and improve the financial stability of the program.

The retirement earnings test is a provision that reduces Social Security benefits for individuals who continue to work while receiving benefits. Specifically, beneficiaries between the ages of 62 and 66 lose $1 in benefits for every $2 they earn above $24,800. This results in marginal tax rates as high as 84%, which can discourage older workers from continuing to contribute to the labor force.

Originally introduced in 1935 during the Great Depression, the test was intended to encourage older workers to retire and make way for younger individuals seeking employment. However, the modern workforce has evolved significantly since then. Today, many older Americans are not only living longer but also working in roles that require their experience and expertise. In fact, white-collar “knowledge work” has become increasingly common, with many people finding their 60s to be the most productive years of their careers.

Despite these changes, the retirement earnings test continues to have a negative impact on older workers. It discourages them from working, even when they are physically and mentally capable of doing so. For example, a 62-year-old earning $30,000 would face a 74% marginal tax rate, resulting in $2,600 being taken out of their annual Social Security benefits. Similarly, a 64-year-old earning $70,000 would face an 84% marginal tax rate, losing $22,600 in benefits.

While the lost benefits are gradually added back once individuals reach full retirement age, many perceive the test as a pure tax and reduce their earnings or stop working altogether. Additionally, those who do not live to the average life expectancy never recoup their lost benefits.

Economic studies have shown that the retirement earnings test significantly reduces labor force participation among older workers. Many individuals could work years longer than they currently do, but the test acts as a disincentive. With over 20 million people aged 62 to 66 in the U.S., and most claiming Social Security benefits at those ages, the impact of this policy is far-reaching.

Ending the retirement earnings test could add between 166,000 and 1.035 million older workers to the labor force, boosting personal incomes by $10.5 billion to $65.7 billion annually. This increase in work and earnings could lead to significant revenue gains, including up to $8.2 billion for Social Security, $1.9 billion for Medicare, $5.3 billion for federal income taxes, and $2.6 billion for state and local taxes — totaling up to $17.9 billion per year.

In addition to the economic benefits, ending the retirement earnings test could extend the solvency of Social Security by up to three months and lead to a small reduction in the poverty rate. Continued work at older ages can also have positive impacts on physical and mental health, offering additional benefits beyond just economic gains.

Cultural challenges, such as a decline in conscientiousness among young Americans, highlight the need for older workers to share their knowledge, wisdom, and resilience with younger generations. The Senior Citizens’ Freedom to Work Act of 2026 represents a win-win reform that addresses these issues while promoting economic growth and social well-being.

Historically, there has been bipartisan support for similar reforms. In 2000, Congress eliminated the retirement earnings test for everyone above Social Security’s normal retirement age, and the bill passed without any opposition from either party. There is no reason why fully eliminating the test should not garner similar support today.