SOCIAL SECURITY IQ: WORKING AFTER CLAIMING

Carla Christian

Yay for the freedom of retirement — no more morning alarms or daily commutes. Maybe you dream of that day and, with your first Social Security check in hand, leaving work life behind.

But what if you continue working after you claim Social Security? Some prefer to, as they may find it satisfying, or simply enjoy or need a little extra income. Following are important things to know for those who work while receiving Social Security.

Can I work and collect Social Security at the same time?

Yes. You can also go back to work after you make a claim  — even years later.

Keep in mind that work income may reduce your benefits if you haven’t reached full retirement age (FRA). Prior to your FRA, you’ll lose $1 in benefits for every $2 you earn over $21,240 annually (in 2023). For example, if you earn $41,240, your Social Security benefit will be reduced by $10,000.

Once you reach your FRA you can receive full benefits with no limits on your earnings. 

What if I reach my FRA in the middle of the year?

In the year you reach your FRA, your earnings limit is bumped up to $56,520 (in 2023). Plus, Social Security withholds only $1 in benefits for every $3 earned over the limit.

For example, if you earn $86,520 in  the year you reach your FRA, your benefits will be reduced by $10,000.  That applies to earnings up until your FRA birthday; past that, there is no benefit reduction no matter how  much you earn.

Are benefit reductions lost forever?

The good news is, you’ll get some back. Social Security calculates the total amount payments were reduced during your pre-FRA working years. They determine how many months of payments that adds up to, and reset your claiming age (and payment amount) forward by that many months.

Here’s a hypothetical example: Assume you claim Social Security at 62 but continue working until your FRA at 67, and the total amount your benefits are reduced adds up to 10 months of Social Security payments. When you reach FRA, your benefit resets as if your claim date was later by that many months.

Your benefits are now calculated as if you had claimed at age 62 years 10 months. The difference is that you received 70 percent of your “full” benefit by claiming 60 months early(at 62), but you now get 74.2 percent for claiming 50 months early.