Gerelyn Terzo

Tue, August 11, 2026 at 6:02 AM EDT 5 min read

Quick Read

• Employer short-term disability payments count as earnings under Social Security's retirement earnings test only during the first six months after a worker's last day of actual work.

• Six $5,000 monthly payments totaling $30,000 exceed the 2026 earnings limit of $24,480, potentially causing Social Security to withhold about $2,760 in retirement benefits.

• Workers whose disability is expected to last 12-plus months should consider SSDI, which pays based on the full retirement amount rather than a reduced early-claiming amount.

• Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.

Picture a 63-year-old electrician who injured his back on a job site in December. His employer's short-term disability plan began paying $5,000 a month, roughly two-thirds of his former wages. Worried about household expenses, he also filed early for Social Security retirement benefits in January. On paper, he is retired. In practice, he is sidelined.

Then Social Security counts the disability payments as earnings. The checks do not feel like wages because he is not pulling wire, reporting to a foreman, or performing any work. For six months, however, the retirement earnings test can treat that employer sick pay much like an ordinary paycheck.

The Six-Month Line That Changes the Treatment

The retirement earnings test applies before full retirement age (FRA), which is 67 for anyone born in 1960 or later. In 2026, someone below that age can earn up to $24,480 before Social Security begins withholding benefits at a rate of $1 for every $2 above the limit. Employer sick pay and short-term disability payments generally count as wages when received during the first six months after the employee's final month of actual work. The rule then changes. Sick pay received more than six calendar months after the month the employee last performed services generally does not count under the earnings test.

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