Can You Collect Social Security While Still Working?

Many people approaching retirement wonder, can you collect Social Security while still working? The answer is yes, but it depends on factors such as your age and income. Working while receiving Social Security can affect the amount of your benefit, especially if you haven’t yet reached full retirement age. Understanding the rules around how your earnings impact your benefits is key to making the best financial decisions for your situation. Whether you’re planning to delay full retirement or supplement your income with part-time work, knowing how Social Security works with employment can help you plan wisely.

Yes, you can work and collect Social Security, but there are several considerations that can affect the overall financial benefit of doing so. While exceeding the Social Security earnings caps can reduce your benefits, up to 85% of your benefits may become taxable, depending on your income. 

One major implication of working while collecting Social Security is that doing so can reduce your benefits up to a certain age. If you haven’t yet reached full retirement age (FRA), there are limits to how much you can earn without reducing your Social Security benefits. In 2024, for example, the earnings limit is $22,320. For every $2 you earn over this limit, $1 is withheld from your benefits. 

However, the rules change in the year that you reach FRA. At this point, the earnings limit increases significantly to $59,520 for 2024. For every $3 you earn over this limit, $1 is withheld from your benefits. Then, beginning in your birthday month of the year in which you reach FRA, no amount of income reduces your benefits. When you reach FRA, Social Security recalculates your benefit based on the amount of money withheld, letting you recoup most or all of the lost income. 

Taxes are another implication to consider. Up to 85% of your Social Security benefits can be taxable if your combined income exceeds a certain threshold. Your combined income is calculated by adding together half of your Social Security benefits to your adjusted gross income and any non-taxable interest you’ve earned. 

For individuals earning between $25,000 and $34,000 – or couples earning between $32,000 and $44,000 – 50% of your benefits may be taxed. Above these thresholds, as much as 85% of your benefits may be taxed. This tax bite can significantly reduce the financial upside of working while receiving benefits.

Before choosing to collect Social Security on top of your paycheck, first weigh the pros and cons of this decision and how it could impact your long-term financial plan. 

• Extra Income: Collecting Social Security while working can provide additional financial support, giving you more flexibility to cover living expenses, pay down debt, or save for the future.
• Potential to boost savings: The extra income can allow you to contribute more to savings or retirement accounts, providing a cushion for later years.
• Delayed retirement credits: If you wait to collect Social Security after your full retirement age, your benefits could increase by about 8% per year until age 70, thanks to delayed retirement credits.
• Work flexibility: Receiving both work income and Social Security may allow for more flexible work arrangements, such as transitioning to part-time work, while still having financial stability.

• Benefit reduction: If you haven’t yet reached your FRA, you’ll face a reduction in benefits beyond certain income limits. While you’ll eventually get this money back after reaching FRA, the immediate reduction in benefits can be frustrating.
• Tax implications: If you’re working and receiving Social Security benefits, your combined income may trigger taxes on your benefits.
• Lower long-term benefit growth: Collecting benefits before FRA can lock in lower monthly payments for the rest of your life, reducing the potential for higher benefits had you delayed.

Full retirement age is an important part in determining how much of your benefits you receive while working. If you start collecting benefits before FRA, you’ll receive a reduced monthly benefit for the rest of your life. If you work after hitting your FRA, you can earn any amount of income without seeing a reduction in your Social Security payments. 

Plus, if your benefits were reduced due to excess earnings before full retirement age, Social Security will recalculate those benefits once you reach full retirement age to repay some or all of the reductions. .

Another factor to consider is the advantage of delaying your Social Security benefits. If you postpone claiming past FRA, your benefits increase by approximately 8% per year up to age 70. This strategy can be particularly beneficial if you plan to continue working and don’t need immediate income from Social Security.

You can collect Social Security while still working, but your earnings may reduce the benefits you receive, depending on your age and income. Once you reach FRA, you can earn any amount without seeing a reduction in your benefits. However, any reductions before your FRA are not lost forever – they’re recalculated and adjusted once you hit that milestone. This balance between working and collecting Social Security can help you optimize your income, but it’s important to be aware of how earnings might impact your benefits, especially in the years before reaching FRA.

• If you’re married, coordinating your Social Security benefits with your spouse can help maximize your household’s overall income. For example, one spouse can claim early while the other delays, ensuring a steady income while allowing the delayed benefit to grow. In some cases, a higher-earning spouse delaying benefits can significantly increase survivor benefits for the lower-earning spouse.
• A financial advisor can help you plan for retirement and assess when to start claiming Social Security. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/ferrantraite, ©iStock.com/MariuszBlach, ©iStock.com/AzmanJaka