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Can You Collect Social Security and Still Work?

By Sean Williams - Sep 5, 2020 at 6:06AM

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The answer isn't as cut-and-dried as you might think.

You may not realize it, but there's a very good chance you'll rely on Social Security income to some degree when you retire.

An April survey from national pollster Gallup found that 89% of current retirees lean on their Social Security as either a major or minor source of income. This jibes with data from the Social Security Administration showing that approximately 3 out of 5 retired workers receive at least half of their monthly income from the program.

Meanwhile, an estimated 88% of nonretirees polled by Gallup believe they'll need their Social Security income to help make ends meet in retirement. This 88% figure marks an all-time high since this annual poll began in 2001. 

Two Social Security cards partially covering a one hundred dollar bill.

Image source: Getty Images.

What happens if you work and collect Social Security income at the same time?

Living expenses for seniors are on the rise. Medical care inflation has frequently outpaced annual cost-of-living adjustments in recent years, and debt levels for seniors have skyrocketed over the past two decades.

According to data from the Federal Reserve Bank of New York, persons aged 70 and older have seen their total debt burden increase by 543% to $1.1 trillion between 1999 and 2019. The news isn't much better for seniors in their 60s, with the total debt burden rising by an unsightly 471% to $2.14 trillion over the same time frame. 

Now more than ever, seniors need to maximize every channel of income possible, including Social Security.

The big question is: Can you collect Social Security benefits and work at the same time to double up on your income streams? The answer isn't as clear-cut as you might think.

An older person standing in front of a workshop bench.

Image source: Getty Images.

Here's what happens if you collect Social Security early while working

To answer the most basic question, you absolutely can work, part- or full-time, while receiving Social Security benefits. However, there are rules that limit how much of your benefit you're allowed to keep depending on your claiming age, full retirement age (i.e., the age you become eligible to receive 100% of your monthly benefit, as determined by your birth year), and your earned income.

For example, anyone receiving Social Security benefits who won't reach their full retirement age in 2020 (or any current year) is subject to what's known as the retirement earnings test. The retirement earnings test allows the Social Security Administration to withhold some or all of your benefits based on much you earn. In 2020, early filers are allowed to earn up to $18,240 ($1,520 a month) before withholding kicks in.

If you earn over $18,240 in wages or salary, $1 in benefits will be withheld for every $2 in earnings above this threshold. The retirement earnings test might thus prevent you from double-dipping on income sources or paying off debt. 

A half-empty hourglass next to a calendar.

Image source: Getty Images.

If you'll hit full retirement age this year and are working, here's what to expect

It's a similar story, but with a bit of twist, for working seniors who will hit their full retirement age sometime in 2020 (or in any current year).

Social Security claimants who will hit their full retirement age at some point during the current year are allowed to earn up to $48,600 ($4,050 a month) in 2020 before any sort of withholding kicks in. In addition, only $1 in benefits is withheld for every $3 in earned income above the threshold.

If you've hit full retirement age and are working, here's what happens

Finally, there are Social Security beneficiaries who reach their full retirement age and still work. The great news is that the retirement earnings test no longer applies in this scenario. Once you hit your full retirement age, no matter when you began taking Social Security benefits, you'll be allowed to generate any amount of earned income without a dime of your Social Security benefits being withheld by the Social Security Administration.

Furthermore, any benefits that were withheld by early claimants in years where they earned too much will be returned to those beneficiaries in the form of a higher monthly payout once they reach full retirement age. With the exception of an early passing, you don't lose withheld benefits from the retirement earnings test.

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