Retirement is becoming incredibly expensive, and it's getting more challenging to save for the future. Only about half of workers say their savings will be their primary source of income in retirement, according to a 2023 report from the Transamerica Center for Retirement Studies, and nearly one-quarter expect to rely heavily on Social Security.
Another option is to continue working at least part-time in retirement. This can be a smart way to stretch your savings, reduce your dependence on Social Security, and provide some extra income. But if you're still working after taking benefits, it could come back to bite you.
Depending on your income, your Social Security checks could be reduced or even withheld entirely. Here's what you can expect if you continue to work after filing for benefits.
How your income will affect your Social Security
The first step is knowing your full retirement age (FRA). It falls between ages 66 and 67 for everyone; it's 67 for anyone born in 1960 or later. If you've already reached your FRA, you don't need to worry about this -- your income won't affect your benefit amount.
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However, if you haven't reached your FRA yet, you'll be subject to the earnings test. This is an annual income limit that will determine how much, if any, of your benefits will be deducted based on your wages.
This limit will change from year to year to account for inflation. There are also two different limits, depending on whether or not you'll reach your FRA this year:
| Income Limit in 2024 | Benefit Deduction | |
|---|---|---|
| If you will reach your FRA in 2024 | $59,520 per year | $1 for every $3 over the limit |
| If you won't reach your FRA in 2024 | $22,320 per year | $1 for every $2 over the limit |
Source: Social Security Administration. Table by author.
So, for example, say you're 62 years old with an FRA of 67 and earn $30,000 per year from your job. In this case, you won't reach your FRA in 2024, so you're subject to the $22,320 limit. Your income is $7,680 over that limit, so your benefits would be reduced by $3,840 per year or $320 per month.
In some cases, these reductions can be drastic. Depending on your income, it's even possible to have your entire benefit withheld if it's significantly higher than the earnings test limit.
Is it worth it to keep working after taking benefits?
The good news is that even if you face benefit reductions, they're not permanent. Once you reach your FRA, the Social Security Administration will recalculate your benefit to account for any money that was withheld, and you'll start receiving larger checks.
That said, if you know you will be working in retirement, it may be worthwhile to hold off on taking Social Security at least until you reach your FRA. Especially if you're earning enough from your job that the majority of your benefit will be withheld, it may not make sense to start claiming yet.
In some cases, though, that may not be an option. If you've already started taking benefits and are stretched thin financially, going back to work may be a smart move -- even if it means your Social Security will be reduced. The bright side is that you'll still receive those larger checks once you reach your FRA.
Working while on Social Security can help create a more financially secure retirement, but it's important to know how your income will affect your benefit amount. When you're aware of the earnings limits, you can ensure you're heading into retirement as prepared as possible.
