For many seniors, retirement doesn’t mean disappearing from the workforce entirely. Some people want to retire and still work part-time, while others must keep working into their traditional retirement years out of financial necessity.
Earning a paycheck is typically not a bad thing for seniors, but things can get tricky because work can affect your Social Security benefits in certain situations. Some retirees can work as much as they want while still collecting Social Security, while others have strict limits, and failure to understand them could lead to an unexpected loss in retirement benefits.
Here’s what you need to know about working while collecting Social Security so you can see what will happen if you decide to work after claiming your retirement checks.
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These retirees can work as much as they want
For some seniors, the size of their paycheck will have no impact on their monthly Social Security benefits. They can work as much as they want, as many jobs as they want, to supplement the money in their retirement plans.
Seniors who can do that are those who have already reached their full retirement age (FRA). FRA is based on birth year. For anyone born in 1960 or later, it’s 67. As the Social Security Administration makes clear, “starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.”
Working after FRA will not only not reduce your monthly checks, but could ultimately end up increasing them because benefits are based on average wages during your 35 highest earning years. If the salary you’re earning as an older retiree is more than the amount you earned during any of your younger years that are included in the 35 years used to calculate benefits, you could get a larger payment once your new work is factored in.
These work limits apply to younger Social Security beneficiaries
If you haven’t hit FRA yet, then you can’t just accept a high-paying job and assume your benefits will stay the same or increase. There are work limits, and once you hit a certain threshold, you temporarily forfeit some of your Social Security income. Specifically:
- If you earn more than $24,480 and won’t hit FRA all year, you lose $1 in benefits for every $2 above this threshold.
- If you earn more than $65,160 and you will hit FRA at some point during the year but haven’t yet, you lose $1 in benefits for every $3 above that threshold.
The SSA holds back entire checks based on how much of your benefit is lost when you exceed these limits.
Now, the loss of the money is temporary because your benefits are recalculated at full retirement age. For the months when you received no benefit, the early filing penalty that originally applied for that month is credited back. This means your future Social Security benefit will be higher.
However, if your retirement plan involved getting money from both Social Security and your job, you’ll be left without some of this income if the work limits apply to you. You need to prepare for that as you decide how you’ll support yourself in retirement.
