Whether or Not You Should Keep Working While on Social Security

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Social Security is generally seen as the main income for retirees. There are, however, no rules that stop a person from working and collecting Social Security benefits. In fact, more than a quarter of U.S. adults aged 65 to 74 are still in the workforce, according to the federal Bureau of Labor Statistics, and this number has been rising steadily. So, there is nothing wrong with working past the traditional retirement age, but it may impact the amount of your benefits amount. To help you decide, this article discusses whether or not you should keep working while on Social Security.

Why work while on Social Security?

Retirement is becoming expensive, and saving enough money for old age is getting difficult. This is the primary reason for pushing people to work even after retirement. According to a 2023 Transamerica Center for Retirement Studies report, only half of the workers surveyed said their savings would be their primary income source during retirement.

The same study found that about half of baby boomers expect to continue working past age 70 or never retire at all. Moreover, about 83% of those respondents said they expect to continue working for financial reasons.

Apart from financial reasons, some also believe that working during retirement is a good way to pass the time, as well as reduce your dependence on Social Security. Many are also of the opinion that working, at least part-time, in retirement provides them with a sense of purpose and structure.

Whatever the reason, the truth is that working while collecting Social Security benefits can adversely impact your monthly benefits check. Thus, before you make a decision, you must understand the pros and cons of working while on Social Security.

Should you keep working while on Social Security?

Before we discuss whether or not you should keep working while on Social Security, it is important for you to understand the concept of FRA (Full Retirement Age). You can start receiving Social Security benefits at age 62, but you get 100% of your benefits only after reaching your FRA.

Your FRA depends on your birth year. For instance, your FRA is 67 if you were born in 1960 or after, and it is between 66 and 67 if you were born from 1943 to 1959.

Now that you know the basics, it will be easier for you to decide whether or not you should keep working while on Social Security. You need to consider the following points when deciding whether or not you should keep working while on Social Security:

Social Security may withhold your benefits

If you are working while on Social Security, the SSA may withhold part of your benefit depending on your income and FRA. In 2024, the SSA may withhold $1 of your benefit for every $2 of your income above $22,320 until the year you reach FRA.

The SSA may withhold $1 of your benefit for every $3 of income over $56,520 in the year you reach FRA until before you become eligible for full benefits.

After the month you hit your full retirement age, there is no withholding at all. You can earn any amount from work and it won’t reduce your monthly benefits payment.

Not all income counts

The threshold income that the SSA uses to determine the benefits to withhold doesn’t include all your income but rather only the income from work and some related income. For instance, besides salary and wages, the SSA considers bonuses, severance pay and more. On the other hand, the SSA doesn’t consider unemployment benefits and household income, such as your spouse’s earnings.

Report earnings early

If you are working while on Social Security, the SSA expects you to report your estimated earnings to the local Social Security office or by calling the national helpline (800-772-1213). The SSA then uses that number to determine the amount to be withheld. Next year, when the SSA receives the proof (W-2s and other tax records) of your actual income, it adjusts the withholding accordingly.

SSA pays you back

The SSA doesn’t forfeit the benefit amount that it withholds. Rather, it starts to repay that money after you reach FRA. It implies that you won’t get back the benefits withheld in a lump sum, but the SSA will add some of it back to your monthly benefits. You will be able to recoup most, if not all, of your benefits withheld.

Different rules apply if you got benefits only part of the year

Many people don’t wait until December 31 to claim benefits. The SSA uses a different rule to determine benefits to be withheld for such people. 

For instance, for those who claim benefits on October 1, the SSA uses the “first year” rule. Under this, the recipient gets the full benefit for those three months (October to December) if they earn less than $1,860 for the month. The SSA applies the $1-for-$2 withholding rule if the income is more than $1,860.

Continuing to work may increase your benefit

There are good chances that continuing to work may actually increase your overall Social Security benefits. The SSA uses your 35 highest-earning years to calculate your benefit amount. Even if you have already claimed benefits, the SSA will re-calculate your annual benefits depending on inflation and work income.

This means that if you are continuing to make decent money, your earnings from later years may get a place in your 35 highest-earning years, resulting in increasing your lifetime monthly average income.