Your Social Security benefit isn't set in stone once you start collecting benefits.
There are a lot of ways your benefit could change. Most seniors are familiar with the annual COLA, which increases benefits across the board to adjust for inflation each year. Some are also aware how different factors could affect your Social Security benefits.
Most of the rules regarding impacts on your monthly benefits check are straightforward and spelled out for seniors. But sometimes you need to read between the lines and find the hidden rules that could lead to a significant change in benefits.
Such is the case for those who continue to work in their 60s and beyond even as they collect benefits. There are multiple rules that apply, but one hidden rule could mean a bigger benefit for some.
Image source: Getty Images.
You might see a reduction in benefits at first, but it's only temporary
It's not always the case that working while collecting Social Security benefits results in a bigger benefit. At least not right away. That's due to a rule called the Social Security earnings test.
The earnings test applies to anyone collecting Social Security who hasn't yet reached their full retirement age. That's age 67 for anyone born in 1960 or later, and a few months earlier for those born in 1958 or 1959. The test looks at your earned income for the year. If you earn over a certain threshold, the Social Security Administration will start withholding some of your benefit.
In any year before you reach full retirement age, the earnings threshold is low and the SSA will reduce your annual Social Security benefit by $1 for every $2 you earn above it. The threshold is significantly higher for the year you reach full retirement age, and the reduction is only $1 for every $3 above the threshold. For 2025, those thresholds are $23,400 and $62,160.
It's possible you could wipe out your entire benefit if you earn well above those thresholds. But the impact is temporary, and the government will adjust your benefit to make up for the withheld benefits once you reach full retirement age. That can result in a bigger benefit in and of itself, as you basically end up deferring benefits until you really need them later in retirement.
But working in retirement can have a much bigger impact on your benefits that's not explicitly spelled out in the Social Security rules.
The hidden rule that could lead to a bigger benefit
If you dive into how the government calculates your Social Security benefit, you'll notice a tiny detail that many tend to gloss over.
The Social Security Administration uses your average indexed monthly earnings, or AIME, as the basis for your benefit calculation. What that means is it takes your entire earnings history dating all the way back to your first job and adjusts each one for inflation. It then selects the highest 35 years from your entire career, and it calculates the average. That number, divided by 12 (the number of months in a year), is your AIME.
But here's the detail that often goes missed. The "index" for that calculation is tied to the year you turn 60. The Social Security Administration doesn't keep adjusting those past earnings upward after that year. Instead, seniors get an annual COLA, which adjusts their calculated benefit for inflation. Note, the COLA applies to every person eligible for Social Security whether they've started collecting benefits or not.
But if you keep working after age 60, you'll likely receive an increase in pay due to inflation. That makes it more likely you'll replace one of your previous 35 highest-earning years with a new number. And when that happens, the Social Security Administration will recalculate your benefit and start paying you a bigger check.
The impact can be significant for anyone, even high earners. In fact, if you want the maximum possible Social Security benefit for your age, you'll need to continue working indefinitely.
While the well-known Social Security rules like the earnings test might discourage people from working after claiming benefits, digging into the details shows just how beneficial it can be for a lot of seniors.
