Now more than ever, older adults are choosing to work later in life. Roughly half of baby boomers say they expect to continue working past age 70 or never retire at all, according to a 2023 report from the Transamerica Center for Retirement Studies, and 83% of those respondents say they're doing so for financial reasons.
There's nothing wrong with continuing to work past the traditional retirement age, especially if you need the extra income. But if you're still working after you take Social Security, it could affect your benefits. In some cases, your benefit amount could be slashed or even withheld altogether.
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How working affects your Social Security
You don't necessarily need to retire as soon as you file for Social Security, and it is possible to claim benefits while continuing to work. But depending on how much you're earning from your job, your payments could be partially or fully withheld.
If you haven't yet reached your full retirement age (FRA), you'll be subject to the retirement earnings test. This is an income limit that will determine if, or by how much, your benefits will be reduced. The more you earn over the limit, the greater that reduction will be.
The earnings test limit changes from year to year to account for inflation, and there are two different limits depending on whether you'll reach your FRA in 2024 or not. (If you're unsure of your FRA, it's 67 years old for anyone born in 1960 or later, and either 66 or 66 and a few months for anyone born before 1960.)
| Retirement Earnings Test Income Limit | Benefit Reduction | |
|---|---|---|
| If you won't reach your FRA in 2024 | $22,320 per year | Benefits will be reduced by $1 for every $2 you earn over the limit |
| If you will reach your FRA in 2024 | $59,520 per year | Benefits will be reduced by $1 for every $3 you earn over the limit |
Source: Social Security Administration. Table by author.
So, for example, say you're 65 years old with a FRA of 67, and you're earning $40,000 per year from your job. In this case, you won't reach your FRA in 2024, so you're subject to the $22,320 annual limit. Your income is $17,680 over the limit, which means your benefits would be reduced by $8,840 per year (or around $737 per month).
Depending on your benefit amount and income, it is possible for your entire monthly payment to be withheld. This can be especially tough for those who are continuing to work for financial reasons. If you're still working because you need the income, yet your income is resulting in smaller Social Security checks, that could put you in a challenging spot financially.
The good news
The positive news about working while on Social Security is that these reductions aren't permanent, and you'll receive larger checks later.
You're only subject to the earnings test income limits until you reach your FRA. Then the Social Security Administration will recalculate your benefit to account for the money that was withheld, and you'll start receiving larger checks. Once you're past your FRA, your income will not affect your benefits at all.
Social Security can go a long way, but if you're still working while on benefits, you may receive less than you think. When you know what to expect, though, you can head into your senior years as prepared as possible.
