When it comes to Social Security benefits, many Americans traditionally consider the age of 65 as “retirement age.” However, the actual “full retirement age” (FRA) for those born in 1960 or later is 67, according to the Social Security Administration (SSA). While you can begin receiving Social Security benefits as early as age 62 or delay them until age 70, working during retirement can affect your benefits in various ways. Let’s explore the impact of working after reaching full retirement age.
Full Retirement Age and Filing for Benefits
This Article Includes
- 1 Full Retirement Age and Filing for Benefits
- 2 Can Working After Full Retirement Age Increase Social Security Benefits?
- 3 Working Before Full Retirement Age Can Temporarily Reduce Benefits
- 4 How Earnings Can Affect the Taxability of Your Benefits
- 5 Conclusion: Weighing the Pros and Cons of Working After Full Retirement Age
The concept of “full retirement age” (FRA) is crucial when it comes to Social Security. For individuals born in 1960 or later, the FRA is set at 67. You can start receiving benefits at age 62, but this will result in a reduced monthly payment. Alternatively, delaying benefits until age 70 allows you to earn higher payments due to delayed retirement credits.
However, there are additional factors, such as working after reaching full retirement age, which can impact your benefits.
Can Working After Full Retirement Age Increase Social Security Benefits?
Once you reach full retirement age, continuing to work can potentially increase your Social Security benefits, but only under certain conditions. The SSA calculates your Social Security benefit based on your highest 35 years of earnings. If you continue working and earn a higher income during your retirement years, those earnings could replace one of your lower-earning years in the SSA’s calculation, potentially increasing your benefits.
However, if your earnings do not surpass the income from your top 35 years of earnings, they will not affect your monthly benefit. Therefore, if you are not earning at a high level after reaching FRA, it may not be worth continuing to work for the sake of increasing your Social Security payments, although you will still benefit from the income.
Working Before Full Retirement Age Can Temporarily Reduce Benefits
If you decide to begin receiving Social Security benefits before reaching full retirement age, and you continue working, your benefits may be temporarily reduced. In 2025, the SSA will reduce your benefits by $1 for every $2 you earn above $23,400.
Once you reach your full retirement age, the reduction is less severe. For example, if you reach full retirement age in 2025, the SSA will reduce your benefits by $1 for every $3 you earn above $62,160 until the month you turn 67. After reaching full retirement age, there is no reduction in benefits, regardless of how much you earn.
It’s important to note that these reductions are only temporary. Once you reach full retirement age, your monthly benefit will be adjusted to compensate for the reductions that were made while you were still working and receiving benefits.
How Earnings Can Affect the Taxability of Your Benefits
While continuing to work after reaching full retirement age may boost your Social Security benefits, it can also lead to a higher tax burden on those benefits. If you have a substantial income, a portion of your Social Security benefits may be subject to taxation.
For individual taxpayers, if your combined income (which includes wages, interest, and other income) falls between $25,000 and $34,000, up to 50% of your Social Security benefits may be taxable. If your combined income exceeds $34,000, as much as 85% of your Social Security benefits could be subject to taxes.
For married couples filing jointly, the threshold for 85% taxation of Social Security benefits is $44,000. Between $32,000 and $44,000 in combined income, up to 50% of your benefits may be taxable.
Conclusion: Weighing the Pros and Cons of Working After Full Retirement Age
Deciding whether to work after reaching full retirement age depends on your financial goals and individual circumstances. If your post-retirement income is high enough to replace one of your lower-earning years, it can boost your Social Security benefit. However, if you aren’t earning at a level that surpasses your top 35 years, continuing to work might not increase your benefit payments.
Additionally, while working after retirement can boost your income, it can also lead to temporary reductions in benefits or tax consequences. Before making a decision, it’s important to consider these factors and consult with a financial advisor to determine the best strategy for your retirement.