Many people keep working after they start Social Security, by choice or by need. It is allowed, but your age when you start and how much you earn can change what you receive, and what you owe in tax.
- Before full retirement age, earnings can temporarily reduce your benefit
- Withheld benefits are not lost forever
- After full retirement age, the earnings test no longer applies
- Your pay can also make more of your benefit taxable
The earnings test
If you claim before your full retirement age and keep working, Social Security looks at your earnings. If they are over a yearly limit, some of your benefits are held back. The limit changes every year, and it is higher in the year you reach full retirement age.
The test counts earnings from a job or self-employment. It does not count pensions, investment income or retirement account withdrawals.
Held back, not lost
Benefits withheld because of the earnings test are not gone. When you reach full retirement age, Social Security recalculates your benefit to credit you for the months that were held back. The result is a higher monthly amount going forward. Many people find this a helpful point to keep in mind.
After full retirement age
Once you reach full retirement age, the earnings test no longer applies. You can earn any amount and still receive your full benefit.
Taxes on your benefit
Separate from the earnings test, your income can make part of your Social Security taxable. Wages add to your income, and a higher income can mean more of your benefit is taxed. For that reason, working while collecting can have a bigger effect on your tax return than people expect.
Higher income can also affect your Medicare premiums two years later.
Things to look at before you decide
- How much will I earn this year, and how long will I work?
- Does it make sense to wait to claim until I stop working?
- How much of my benefit may be taxable?
- Do I want to have taxes withheld from my benefit?
- Find your full retirement age on your Social Security statement
- Estimate your earnings for this year
- Check the current earnings limit on ssa.gov
- Ask how your income may affect taxes and Medicare premiums
Working in retirement is common, and the rules are manageable with a plan. If you would like to see how your pay, your benefit and your taxes fit together, let's talk.
Book a consultationSources and references
This article is general information, not tax or investment advice for your situation. Social Security rules and limits change each year. Talk with a qualified professional before making decisions.
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