True or false: Once you begin receiving Social Security retirement benefits, they'll never be higher.
This statement is false, as many retirees already know. Social Security calculates a cost-of-living adjustment (COLA) each year. These adjustments boost everyone's benefits.
However, COLAs aren't the only way your retirement benefits might change for the better. Here's the little-known reason why working after claiming Social Security could increase your benefits.
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Doesn't working after claiming Social Security decrease benefits?
Some readers might already be thinking about an objection to this claim. Doesn't working after claiming Social Security decrease benefits instead of increasing them? In some cases, yes -- but only temporarily.
The truth in this objection involves something called the early retirement earnings test. If you retire before your full retirement age (FRA) and continue to work, Social Security could withhold a portion of your retirement benefits if your earnings are above a specified level.
For 2025, Social Security will deduct $1 in benefits for every $2 earned above $23,400 by retirees who haven't reached their FRA. During the year you reach your FRA, though, Social Security will deduct $1 in benefits for every $3 earned over $62,160 until the month you reach your FRA.
It is true, therefore, that working after claiming Social Security could decrease your benefits in this scenario. However, you'll begin receiving all of the withheld benefits once you reach your FRA. Also, if you work after your FRA, Social Security won't deduct any of your benefits.
In case you were wondering, only wages (including bonuses, commissions, and vacation pay) count as earnings with this early retirement earnings test. Social Security won't include money received from annuities, investments, pensions, veterans benefits, or other retirement benefits.
The Social Security "secret" many retirees don't know about
However, going back to work after claiming Social Security retirement benefits could also increase your benefits for the rest of your life. It could happen even in cases when you make more money than the early retirement earnings limits.
How can this be true? The "secret" is that the Social Security Administration (SSA) will recalculate your benefit amount if you continue working. It's possible your earnings could result in a higher benefit.
The key thing to know here is that SSA uses your 35 highest earnings years to calculate your retirement benefits. If you earn more during a year when you return to work after claiming retirement benefits than you did during a year earlier in your career, your retirement benefits will be adjusted higher.
Granted, it's a little more complicated than that. SSA first adjusts (or indexes) your earnings to reflect overall changes in wages resulting from an increase in the standard of living. However, the general idea still applies that if you earn more by going back to work than any of the indexed 35 years already in your earnings history, your most recent year of work will replace your previous lowest earnings year. And your retirement benefit will go up.
This scenario could easily kick in if you return to work for a while in a job similar to the one you held when you initially retired. Many people end their careers making a lot more money than they did when they started.
Should you go back to work after retiring?
I suspect many retirees shudder at the thought of going back to work. If your income from Social Security and other sources supports a comfortable retirement, you won't need to even consider the idea.
However, some people claim Social Security retirement benefits and then later realize they're not making enough to live the lifestyle to which they're accustomed. If you're in that group, going back to work could enable you to quickly boost your income. It could also permanently increase your retirement benefits.
