You can work and still receive Social Security benefits, but how much you receive depends on a number of factors.
First, if you do plan to continue working after becoming eligible to receive benefits, you might consider delaying filing for benefits for as long as possible. That’s because the earlier you begin drawing benefits, the lower the amount you will receive. In fact, your monthly payout will be permanently reduced from what you’ll receive if you wait until full retirement age (FRA).
Your FRA depends on the year you were born (note that for people born on Jan. 1 of any year, they should refer to the previous year):
- Born 1943-1954: full retirement age is 66
- Born in 1955: 66 plus two months
- Born in 1956: 66 plus four months
- Born in 1957: 66 plus six months
- Born in 1958: 66 plus eight months
- Born in 1959: 66 plus 10 months
- Born in 1960 or later: 67
Benefit Reduction Due to Work
If you are working and begin drawing benefits before your full retirement age, your payout could be further reduced if you earn more than the prescribed income limit. In 2023, the annual earnings limit is $21,240. In this scenario, Social Security will deduct $1 from your benefits for each $2 in excess of the limit.
Benefit Reduction in Your FRA Year
The benefit reduction amount and the earned income limit both change the year you reach FRA. In 2023, the earned income limit is $56,520. In this year only, the reduction is adjusted to $1 for every $3 in excess of $56,520, but only up until the month you reach FRA. After that, there will no longer be a reduction due to work income.
In the first full month after your FRA, Social Security will begin paying out your total eligible amount (which depends on the age you started drawing benefits) for any whole month after FRA, regardless of how much more you earn that year (and every year thereafter). In other words, from that point on, you will receive the full amount you were eligible for at the age you began drawing benefits.
You might wonder if you will ever receive the money that was held back due to your excess income. The answer is yes. Starting the following January, after you turn full retirement age, your Social Security benefit will increase to reflect those previously lost benefits.
If working while drawing Social Security seems like a bad idea, consider that you could benefit from a couple of advantages. First, the automatic benefit reductions that occur while you’re working will help reduce your income tax liability for those years. Second, your work income could increase your permanent Social Security payout if any or all of those years before FRA are among your 35 highest-earning years. As you continue to pay FICA taxes on your work income, the benefit is recalculated every year. This is a way to increase your lifetime benefit if you begin drawing Social Security early.
Work Until Age 70
The most strategic way to earn the highest possible lifetime benefit from Social Security is to keep working and delay drawing Social Security benefits until age 70. This is because during the years between your official FRA and the month you turn 70, you can earn additional credits that reward you for delaying. This will permanently bump up your payout.
If You Go Back to Work
Also, be aware that if you’ve already started drawing Social Security benefits but wish you hadn’t, you can cancel your application as long as you do so in the first 12 months. Note that you are required to pay back all of the money you received from Social Security, including any spousal benefit that was based on your earnings record and all Medicare premiums that were deducted from your benefits. However, doing so could reset your benefit to a higher amount when you reapply later – if your subsequent annual income counts among your highest 35 years of earnings.
If you have already reached your full retirement age (but have not yet turned age 70), you no longer have the option cancel your application. However, you can have your Social Security benefit suspended, which might reduce your tax bill while you continue working.