Social Security retirement benefits include the word "retirement" for a reason. A key purpose of the federal program is to partially cover the living expenses of retirees who no longer have paychecks coming in.
But many Americans don't actually fully retire once they begin receiving those retirement benefits. How are your benefits affected if you collect Social Security and continue to work?
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Before reaching your full retirement age
The answer to this question depends on when you were born and how old you are when you begin collecting Social Security retirement benefits. Why does when you were born matter? That's how you'll know what your full retirement age (FRA) is, as shown in the table below.
| Year of Birth | Full Retirement Age |
|---|---|
| 1943-1954 | 66 |
| 1955 | 66 and two months |
| 1956 | 66 and four months |
| 1957 | 66 and six months |
| 1958 | 66 and eight months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
| Note: If your birthday is January 1 of any year, refer to the previous year. | |
Data source: Social Security Administration.
When you begin collecting benefits also matters. If you do so before you reach your FRA and continue to work, your benefits could be reduced.
The Social Security Administration (SSA) will deduct $1 from your benefits for every $2 you earn above the annual limit (including wages, bonuses, commissions, and vacation pay). That limit is $21,240 for 2023. It will increase to $22,320 in 2024.
For example, let's suppose you begin collecting Social Security retirement benefits next year at age 62. You continue working and earn $30,000 over the course of the year. SSA will deduct $3,840 from your Social Security benefits. The calculation of this benefit reduction is as follows:
($30,000 earnings-$22,320 annual limit for 2024) X ($1 reduction / $2 in earnings) = $3,840
During the year you reach your FRA
You'll get to keep more of your earnings during the year you reach your FRA. Sure, SSA will continue to deduct from your Social Security retirement benefits if you earn above a specified annual limit. However, there are two key changes that work in your favor.
First, the annual limit is much higher. For 2023, the annual limit on your earnings in the months prior to reaching your FRA is $56,520. This limit will increase to $59,520 in 2024. Second, SSA will only deduct $1 from benefits for every $3 earned over this limit.
To use our example from earlier, you would be able to keep all of the $30,000 in earnings thanks to the higher annual limit. Let's suppose, though, that you instead earned $70,000 in 2024 and reached your FRA during the year. SSA would deduct $3,493. Here's the calculation of this benefit reduction:
($70,000 earnings-$59,520 annual limit for 2024) X ($1 reduction / $3 in earnings) = $3,493
Once you reach your FRA
Now for the best news of all. Once you reach your FRA, there is no longer any limit on how much money you can make. You can continue working and keep all of your earnings and all of your Social Security retirement benefits.
There's more great news, too. Once you reach your FRA, SSA will recalculate your benefit amount to give you credit for any reduced benefits from earlier. In order words, you won't actually lose the money that SSA "claws back" while you work but will instead get it back later.
