Even if you contribute steadily to an IRA or 401(k) plan for many years whileyou’re working, you may need your Social Security benefits to meet your retirement goals. That’swhy it’s important to know what monthly benefit to expect once you sign up.
A good way to get an estimate of your monthly retirement benefit from SocialSecurity is to create an account on SSA.gov and accessyour most recent earnings statement. It should give you an estimate of yourbenefit at different filing ages.
You don’t want to get too hung up on that number, though, since the monthlySocial Security benefit you start out with could change after you’ve filed for anumber of reasons. Here’s why.
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1. COLAs could give you a raise
Each year, Social Security benefits are eligible for a cost-of-livingadjustment, or COLA. The purpose of COLAs is to help ensure that benefits areable to keep up with inflation.
Social Security COLAs are calculated based on third-quarter changes to theConsumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Whenthere’s a rise in the index year over year, Social Security benefits get a COLAautomatically. Congress does not have to vote on a raise every year, which wasthe case prior to 1975.
Social Security COLAs typically take effect in January but are announced theOctober before. That way, seniors know what to expect ahead of time.
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2. You could see your benefits shrink for earning too much money
You’re allowed to work while collecting benefits from Social Security. But ifyou’re getting benefits and you have not reached your full retirement age (FRA),you’ll be subject to an earnings limit. Exceeding that limit could result inhaving benefits withheld.
The earnings limits change yearly. In 2026, you’ll have $1 in Social Securitywithheld per $2 of earnings above $24,480 if you won’t reach FRA by the end ofthe year. If you’ll reach FRA by the end of the year but have not done so yet,you’ll have $1 in Social Security withheld per $3 of earnings above $65,160.
When you have benefits withheld for earning too much money, they’re typicallyrepaid to you in the form of larger monthly checks once FRA arrives. But alltold, you could see a lot of changes to your Social Security benefits if youwork, depending on your income and age.
3. Late-in-life wages could raise your benefits
Your monthly Social Security benefit is calculated based on your 35 highest-paidyears of income. If you opt to work while collecting Social Security and earn ahigh wage, you could replace a year of lower or no earnings in your benefitsformula, leading to larger monthly checks.
Let’s say you claim benefits at FRA, but at that point, you only have 34 years of income on record with the Social Security Administration. If you decide to workand make $70,000 that year, your $70,000 income can replace a year of $0 incomein your benefits formula. And if you earn that $70,000 once you’ve reached yourFRA, there won’t be an earnings limit to worry about.
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4. You could get a second chance at signing up
If you file for Social Security early and regret it, you’re often out of luck –unless you exercise your do-over option. You’re allowed to withdraw your SocialSecurity benefits application within 12 months of approval. If you do that andrepay all of the money in benefits you received, you’ll generally be allowed tofile again at a later date, which could lead to larger monthly payments.
For example, let’s say you claim Social Security at 62 and reduce your benefitsas a result. If you undo your filing within 12 months and repay your benefits,you can file again at 67, at which point you could be looking at much largerchecks each month.
Bottom line
Social Security will most likely play a big role in your retirement plans. But youshould know that while your monthly checks could change for the better afteryou’ve filed for benefits, they could also end up shrinking, at leasttemporarily, depending on the circumstances at hand.
It’s important to understand how your Social Security benefits could change overtime. But it’s just as important to have income outside of Social Security soyou’re not too reliant on those senior benefits.
Another reason your Social Security benefits could change after you’ve filed isif the program is forced to implement broad cuts due to a funding shortfall.Lawmakers have never let that happen in the past, and there’s a good chancethey’ll be able to avoid Social Security cuts in the coming years, too. But it’sbest to have backup income streams in case widespread cuts end up beingunavoidable.
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