
Many individuals face the challenge of balancing their careers and financial needs with the potential impact on their Social Security benefits. While Social Security is intended as a safety net, questions arise about how work income affects eligibility. Specifically, individuals often wonder if they can continue to receive benefits while working full-time.
Navigating the complexities of Social Security can be confusing, but understanding the rules is essential for securing financial stability while continuing to work. In terms of the Social Security retirement benefit, you can start your retirement benefit at any point from age 62 up until age 70. Your benefit will be higher the longer you delay your retirement start date. The date you claim retirement is usually permanent. It sets the base for your benefits for the rest of your life. So, if you are thinking about starting your retirement benefits early at 62, or even at the normal retirement age (NRA) of 67 or 70 while working full time, it is vital to grasp how your work income can affect your benefits.
This article explains how these dynamics work and provides the information you need to make well-informed decisions for your future.
Understanding Normal Retirement Age
The normal retirement age is the age at which an individual can receive their full Social Security retirement benefit, and it varies based on the year they were born. For those born between 1938 and 1959, the full retirement age gradually increases by two months for each birth year, reaching 66 for those born between 1943 and 1954. From 1955 to 1959, the full retirement age continues to increase by two months per year, reaching 66 years and 10 months for those born in 1959. For those born in 1960 or later, the NRA is 67.
So, individuals born in 1954 or earlier have a normal retirement age of 66, and those born in 1960 or later have a normal retirement age of 67.
If an individual claims Social Security benefits before reaching their NRA, the benefit amount will be permanently reduced. The reduction rate is 5/9 of 1 percent for each month benefits are received early.
You are only eligible for NRA benefits once you reach your full retirement age. If you decide to wait until age 70 to start receiving benefits, your monthly amount will increase.
Implications of Working While Collecting Social Security
You can work while receiving Social Security retirement benefits. However, if you have not yet reached your normal or full retirement age, your benefits may be affected by how much you earn. The Social Security Administration (SSA) applies an earnings limit for individuals under full retirement age, and if you exceed this limit, some of your benefits may be temporarily withheld.
The Social Security earnings limit dictates that beneficiaries under NRA age will have $1 in benefits withheld for every $2 in earnings above the annual limit, which was $22,320 in 2024 and is $23,400 in the current year of 2025.
The SSA recalculates benefits each year based on earnings. If you work while collecting Social Security and report higher earnings, your benefit amount could increase in future years, as lower-earning years get replaced with higher-earning ones in the benefit calculation.
Once a beneficiary reaches their NRA, they can work full time without any penalty to their Social Security benefits. This means that earnings no longer affect the amount of benefits they receive. Additionally, any benefits that were previously withheld due to exceeding the earnings limit before reaching NRA may be credited back to the beneficiary. The withheld benefits are typically reimbursed in the form of higher monthly payments once the individual reaches their NRA. This adjustment happens automatically, and the individual will not need to take any action to receive the credited benefits.
Working can also impact the taxability of Social Security benefits, as adjusted gross income over specific thresholds may require beneficiaries to pay income tax on a portion of their Social Security payments.
How earnings affect benefits
In the year an individual reaches their normal retirement age, the earnings limit increases to $59,520, with a reduction of $1 in benefits for every $3 earned over this amount, but only for earnings received before the month of their birthday.
The Social Security earnings test applies only to earned income, which includes wages from a job or income from self-employment. Other forms of income, such as pensions, interest, dividends, and government benefits (like unemployment or welfare), do not affect the earnings limit for Social Security.
The SSA updates benefits annually, typically in January, based on your most recent work history. If you earn more in a given year than in previous years, your benefit calculation may improve, potentially leading to an increase in your monthly Social Security benefits.
For individuals filing as “married, filing separately,” if they live apart from their spouse for the entire year, up to 50% of Social Security benefits may be taxable for incomes between $25,000 and $34,000. For incomes over $34,000, up to 85% of benefits can be subject to tax. However, if the individual is living with their spouse, different tax rules apply.
Understanding Reemployment After Retirement
If you are considering returning to work after retirement, it is essential to understand how reemployment affects your benefits:
- Temporary benefit reductions: If you start working again while receiving Social Security benefits, your benefits may be temporarily reduced if your earnings exceed the annual limit.
- Delayed retirement credits: If you choose to delay filing for Social Security benefits past full retirement age, you will qualify for delayed retirement credits, which increase your monthly benefits. Additionally, your work income during this period will also contribute to those higher benefits.
- Recalculation of benefits: Once you reach full retirement age, Social Security will recalculate your benefits to account for any months you were penalized due to excess earnings.
Options for paying back benefits
Individuals who begin receiving Social Security benefits early have the option to repay the benefits they’ve received and restart them later at a higher payout. The repayment amount includes the full value of the benefits received, accounting for any withholdings such as Medicare premiums and income tax.
This option to repay benefits is available only within the first 12 months of receiving benefits, and the total amount repaid can cover up to 11 months’ worth of benefits.
If a person withdraws their application for benefits and repays the total amount received, they can return to work and later restart their benefits at a higher amount, up until age 70.
Once an individual reaches full retirement age, they can voluntarily suspend their benefits before age 70 to earn delayed retirement credits, which will increase their benefits. This suspension can also affect any spousal benefits that may be received.
Rules and regulations surrounding reemployment
When collecting Social Security benefits and returning to work, retirees must have a true separation from their employer and cannot be retained on the payroll beyond their retirement date to avoid jeopardizing Social Security retirement benefits.
The SSA requires retirees to report their expected earnings for the upcoming year to assess how the earnings test may affect their benefits.
It is important to note that household income does not impact the earnings limit for Social Security; only the retiree’s own earned income is considered in the earnings test.
If a retiree exceeds the earnings limit, their Social Security benefits may be temporarily reduced. Additionally, they will need to repay the amount of benefits withheld once they surpass the earnings threshold, to reinstate full payments.
Individuals receiving spousal or survivor benefits before reaching full retirement age are subject to the same earnings test as those collecting retirement benefits.
We understand that planning for retirement can be overwhelming. At La Porte Law Firm, we prioritize your individual needs and provide personalized guidance on Social Security benefits. Schedule a consultation today, and let us help you make informed decisions about your future
FAQs
A 66-year-old who has reached full retirement age can earn any amount while collecting Social Security. However, if they receive Social Security before full retirement age, their benefits may be reduced. Full retirement age is between 66 and 67 years old, depending on the beneficiary’s year of birth.
Yes, you can work full time and collect Social Security retirement benefits at age 67. In fact, you can earn as much as you want without reducing your benefit payment once you reach full retirement age.
Choosing to begin Social Security benefits at age 66 or 67 (depending on your full retirement age) may be a better option if you want to receive 100% of your monthly benefit right away. While waiting until age 70 to claim benefits results in a higher monthly payment, the increase stops at age 70, so there is no further benefit to delaying beyond that age.
The amount you lose by retiring at 66 instead of 67 depends on your year of birth and how early you retire. In general, retiring early results in a reduction in Social Security benefits, but you’ll receive payments for a longer period of time.