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For many people, Social Security retirement benefits provide part of the financial support they need to retire. However, an increasing number of seniors are continuing to work well past what many consider the traditional retirement age. According to recent Pew Research Center data, 19% of seniors ages 65 and older were still employed in 2023. That’s almost double the share of people who worked 35 years ago.
Whether someone decides to remain in the workforce for financial reasons or because they simply don’t want to retire, a common question is if they can still collect Social Security benefits if they’re also earning a paycheck at work. The short answer is that you can work and collect Social Security retirement benefits at the same time but with some limits and tax consequences.
Key Takeaways
- More seniors are choosing to work past age 65, and you’re still eligible to collect Social Security benefits if you choose to do so.
- The income you earn at your job could temporarily reduce your benefits and increase your tax burden, but it could also increase your benefits in the future.
- The decision to work while collecting Social Security can also impact spousal benefits.
- You can maximize your retirement benefits by either delaying them until full retirement age or ensuring your income remains below certain limits.
- Working after reaching full retirement age has specific benefits and considerations.
Understanding Social Security Benefits While Working
Social Security retirement benefits were created in the 1930s to serve as a financial safety net for retirees. These benefits were designed to replace a portion of a worker’s pre-retirement income when they left the workforce. And though they weren’t designed to be anyone’s sole source of income during retirement, they are the largest income source for most retirees and help lift millions of seniors out of poverty each year.
The Social Security Administration (SSA) allows seniors to start collecting their full retirement benefits between ages 66 and 67, depending on when they were born. For people born in 1960 or later, the full retirement age is 67. However, you can also start collecting benefits as early as 62 at a reduced rate or delay your benefits until age 70 and earn an increased benefit.
These benefits are funded by the Social Security tax, which is 6.2% of your paycheck—and another 6.2% from your employer—on up to $168,600 of your income in 2024. The amount you can collect is based on your average indexed monthly earnings, which are your average earnings for your 35 highest-earning years, adjusted for inflation.
Even if you decide to remain in the workforce, you’ll still be able to start collecting Social Security retirement benefits, whether it be a reduced benefit at age 62, the full benefit at age 67, or an increased benefit at age 70. However, the amount you’re eligible to earn depends on the age you start collecting benefits.
If you start collecting Social Security early, you may receive a reduced amount due to your earned income. However, once you reach full retirement age—age 67, for most people—you’ll earn your full benefit regardless of whether you’re still working.
Impact of Working on Social Security Benefits
As mentioned, the SSA allows you to collect Social Security retirement benefits while working. However, there may be some financial effects, including the amount you can earn, how much taxes you’ll pay, your future benefits amount, and your spouse’s potential benefits.
Earnings Test
Until you reach full retirement age, your earnings in the workplace could affect your Social Security retirement benefits. Before you reach full retirement age, the SSA will deduct $1 of your benefits for every $2 you earn over an annual limit, which is $22,320. For example, if you earn $50,000 at your job, the SSA will deduct $13,840 from your Social Security benefits.
In the year you reach your full retirement age, but before your birthday, the SSA will deduct $1 for every $3 you earn over a different annual limit, which is $59,520. Once you reach your birthday in the year you reach full retirement age, you’ll receive your full benefit no matter how much you earn at your job.
Important
The only income that may negatively impact your Social Security earnings is that which you earn from a job or self-employment. Any pensions, annuities, investment income, or government benefits won’t count toward the income limit.
Tax Implications
The SSA requires seniors earning above a certain threshold to pay income taxes on their retirement benefits. The more you earn, the more of your benefits you’ll pay taxes on, which means working while receiving benefits could increase your tax liability.
If you file an individual tax return, you’ll pay income taxes on up to 50% of your benefits if your income is between $25,000 and $34,000, and on up to 85% of your benefits if you earn more than $34,000. If you file a joint return, you and your spouse will pay income taxes on up to 50% of your benefits if you earn between $32,000 and $44,000, and on up to 85% of your benefits if you earn more than $44,000.
Note
In 2024, nine states tax Social Security benefits. These states are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Colorado makes their Social Security tax fully deductible for residents age 65 and older.
Effect on Future Benefits
Continuing to work while receiving Social Security retirement benefits could actually help increase your benefits. As mentioned, your Social Security benefit is calculated using your 35 highest-earning years. If the most recent year was among your highest-earning ones, your benefit will be recalculated, even if you’re already collecting Social Security. Not only will your earnings increase for the next year, but they’ll permanently increase.
Impact on Spousal Benefits
The SSA allows people to collect Social Security benefits based on their spouse’s work history, though at a reduced amount. This might be likely if one spouse worked outside the home while the other stayed home to raise the children. The spouse that stayed home may not qualify for benefits, so they can instead qualify based on the other spouse’s work history.
If you continue working while collecting Social Security benefits, it could affect your spouse’s benefits. First, if your spouse is collecting Social Security based on your work record, their benefits could be reduced if they start collecting benefits before full retirement age, just as yours would be.
Additionally, because taxes on Social Security benefits are calculated based on combined income, your earned income could increase the amount of taxes your spouse pays on their benefits. On the other hand, just as your own benefits could increase if you continue working and have high-earning years, so could your spouse’s benefits.
Strategies for Maximizing Social Security Benefits While Working
The simplest way to maximize your Social Security benefit while working is to wait until your full retirement age to start collecting it. Once you reach full retirement age—67, for most people—you’ll receive your full benefit no matter how much you earn in the workforce.
Warning
Remember that, in addition to reducing your benefits by your earned income, collecting Social Security benefits before the full retirement age will also permanently reduce the amount you’re eligible for.
On the other hand, you could manage your earnings to help reduce or eliminate their impact on your Social Security earnings. For example, in 2024, you could collect your full early retirement benefit if you earn $22,320 or less. This arrangement might be ideal for someone who wants to continue working a part-time job during retirement.
Of course, delaying benefits or reducing your income isn’t feasible for everyone. If you rely on both the income from your job and your Social Security benefits, your only option may be to collect the reduced benefit for a few years until you reach full retirement age.
Working After Full Retirement Age
Once you reach your full retirement age, the impact of remaining in the workforce is lessened. No matter how much you earn at your job, you’ll still receive the full Social Security benefits you’re eligible for, whether that’s the full benefit if you waited until full retirement age to start collecting or a reduced amount for starting your benefits early.
The income you earn at your job after reaching full retirement age can still have some tax consequences. It could increase the portion of your Social Security benefits on which you pay income taxes. On the other hand, if you continue working and have one of your 35 highest-earning years, you could permanently increase your benefits moving forward.
Frequently Asked Questions (FAQs)
What Are the Rules if I Retire and Work Outside the U.S.?
As long as you have enough work credits, you can still collect Social Security benefits if you live outside the U.S. (unless you live in one of a handful of countries where the SSA can’t send payments). Just like if you work in the U.S., your income earned outside the U.S. could reduce the amount of benefits you’re eligible for until you reach full retirement age.
How Much Social Security Will I Get at 62 vs. 67 and 70?
67 is the full retirement age for anyone born in 1960 or later. Once you reach that age, you can collect 100% of your normal Social Security retirement benefit. If you start collecting benefits at the earliest time, age 62, then your benefits could be reduced by 30% compared to your normal benefit amount. On the other hand, if you delay your benefits until age 70, you can receive 124% of your normal benefit amount.
What Is the Minimum Social Security Benefit?
Starting in December 2023, the special minimum benefit, meaning the minimum amount that someone could earn on Social Security, is $1,066.50 per month for people with 30 years of coverage and as low as $50.90 per month for someone with only 11 years of coverage.
What Is the Maximum Social Security Benefit?
The maximum Social Security benefit is $4,873 per month, but that only applies if you work until age 70. The maximum benefit would be $2,710 if you start collecting benefits at 62 and $3,822 if you start collecting benefits at your full retirement age.
Can Working While Collecting Social Security Affect My Medicare Premiums?
Medicare Part A is generally free, but Medicare Part B charges a premium that’s income-adjusted. If you earn $103,000 or less as an individual or $206,000 or less as a married couple, you’ll pay $174.70 per month in 2024. However, if your income exceeds that, you’ll also pay an income-related monthly adjustment on top of the normal premium.
The Bottom Line
Today, more seniors than ever are choosing to remain in the workforce, whether because they rely on the income from their job or enjoy their work. It’s possible to start collecting Social Security benefits while you’re still working, but there could be financial consequences, including increased taxes and a temporarily reduced benefit.
If you’re nearing retirement age and considering whether working while collecting Social Security benefits is the right choice, include this in your financial planning. Run the numbers using different scenarios, including leaving the workforce altogether, staying in the workforce and delaying your benefits, and staying in the workforce and still collecting your benefits early. The more you know about the possible financial impact, the better prepared you’ll be.
