Can I Claim Social Security and Continue to Work?

Once you reach your late 50s, conventional wisdom holds that you should be finalizing your financial playbook to support a long, happy retirement. But what if walking away from the workforce isn’t the right play call for you?

According to a recent Associated Press poll, nearly 1 in 4 Americans say they plan to keep working long after they’re eligible for retirement, either out of financial necessity or they just really love what they do for a living and find their work fulfilling.

Whatever your reason, one of the most common questions people have once at this time in their lives is when to begin collecting Social Security benefits. If you plan to work later in life, there’s good news: You can claim your Social Security (or survivor) benefit while earning a regular paycheck.

But if this is in the cards for you, here are some things you need to consider.  

WORKING COULD INCREASE YOUR FUTURE BENEFIT

Your monthly Social Security benefit is determined using a formula that counts the 35 years in which you earned the most money. If you’re working and collecting a benefit, your records will be reviewed on an annual basis. That means if you earn more money in a given year than one of the 35 years used to calculate your benefit, the Social Security Administration will knock your lowest-earning year off its calculation table. Ultimately, that could boost your monthly benefit. If that happens, the Social Security Administration will send you a letter informing you of the new amount.

YOUR AGE MATTERS

The age you begin collecting Social Security has a huge impact on your lifetime benefit. Although you can begin collecting Social Security as early as age 62, your lifetime benefit will be significantly reduced because you haven’t reached your full retirement age. Currently, the full retirement age is 66 and 2 months for people born in 1955, and it will gradually rise to 67 for those born in 1960 or later. Keep in mind your monthly, lifetime benefit will increase 8 percent for every year you postpone collecting up to age 70. 

But if you’re working and collecting, your full retirement age is also a factor:

If you’re working under full retirement age for the entire year: $1 is deducted from your benefit for every $2 you earn above the annual limit, which was $17,640 in 2019.

If you’re working in the year you reach retirement age: $1 will be deducted for every $3 you earn above a different limit. In this case, that’s $46,920. Only earnings before the month you reach full retirement age are counted.

Working after you reach retirement age: Starting with the month you reach full retirement age, your earnings will no longer reduce your benefit, no matter how much you earn.

THE SPECIAL EARNINGS LIMIT RULE

Some people who retire in the middle of the year have already earned more than the annual earnings limit, which is why there’s a special rule that applies to earnings for one year, typically the first year of retirement. Basically, you’ll get a full benefit check for any month you’re considered fully retired in that year.

Under your full retirement age: You’re considered retired any month in which your earnings are $1,470 or less and you didn’t perform “substantial services in self-employment.”

Reach full retirement age that year: You’re considered retired in any month your earnings are $3,910 or less and, again, you didn’t perform “substantial services in self-employment.”

WILL OTHER INCOME SOURCES AFFECT YOUR BENEFIT?

Generally, no. Social Security only considers the wages you earn from a job (bonuses, vacation pay and commissions included), or the net-profit you take home if you’re self-employed. Income from pensions, annuities, investment income, earned interest and government/military retirement benefits are not counted.