The COVID-19 pandemic has had a profound financial impact across America, and retirees aren't immune to its consequences. In fact, as many as one-in-four retirees have indicated COVID-19 may force them to start working for a paycheck again

If you're one of the seniors considering returning to work, it's important to realize that this decision can affect your finances in other ways besides giving you a new source of funds. In particular, if you are under full retirement age, your choice to go back to work could lead to a reduction in your Social Security benefits.

Older woman working stocking shelves.

Image source: Getty Images.

How going back to work could affect your Social Security

First things first: if you've already hit your full retirement age (FRA), you don't have to worry at all about working while collecting Social Security benefits. You can earn as much as you want and still get your full benefit amount. FRA is between 66 and 67 (depending on when you were born) and you can find out your full retirement age here

If you're below FRA, though, your benefits will be reduced once you've earned a certain amount of money from work. 

  • If you're below FRA for the full year, you'll lose $1 in benefits for each $2 you earn above $18,240 (as of 2020).
  • If you'll hit FRA sometime during the year, you'll lose $1 in benefits for each $3 you earn above $48,600 (as of 2020). This earning's limit isn't prorated and anything you make after hitting FRA won't count toward the total you're allowed to earn without your benefits being affected. 

These income limits change annually. And the good news is, you won't lose your Social Security benefits forever. Once you reach your full retirement age, the SSA will recalculate the amount of your monthly benefit to account for the income you missed out on because you lost it by earning too much.

But the bad news is, if you're counting on getting your full benefits and having your paycheck (say, because you need more cash since your retirement account investments took a hit during the COVID-19 market crash and now aren't providing enough income), working is only going to help you so much. 

Should you go back to work while collecting Social Security?

If coronavirus has caused your financial situation to suffer, going back to work isn't the worst idea -- even if it does affect your Social Security benefits. In fact, finding a job is far better than withdrawing too much from investment accounts and putting yourself at risk of running out of money later in life.

That's especially true since when you lose your Social Security benefits because you're earning too much, you do get the money back later. It can take time to break even for the missed funds, though -- but you shouldn't let fears about not getting your full checks now prevent you from returning to work if doing so is the right move for you.