Can You Work and Still Collect Social Security?

Many people wonder about the possibility of working while receiving Social Security benefits. This question is especially relevant for those approaching retirement age who may not be ready to completely step away from the workforce. The answer is yes, you can work and still collect Social Security, but there are important factors and conditions to consider. Below, we will delve into these aspects, providing a comprehensive view of how working might impact your Social Security benefits.

Understanding Social Security Basics

Social Security is a government program that provides financial assistance to retirees, disabled individuals, and survivors of deceased workers. It's important to understand the framework of Social Security benefits:

• Retirement benefits can be claimed as early as age 62, although full retirement age (FRA) varies depending on your birth year. For those born between 1943-1954, the FRA is 66; it gradually increases to 67 for those born in 1960 or later.
• Disability benefits support individuals who cannot work due to a qualifying medical condition.
• Survivor benefits assist family members of deceased workers.

Working While Receiving Social Security Retirement Benefits

When you work while receiving Social Security retirement benefits, your earnings can affect the amount you receive, depending on your age:

1. Before Full Retirement Age (FRA)

   • If you are under your FRA for the entire year, your benefits will be reduced if your earnings exceed a certain threshold. As of 2023, this limit is $21,240.
   • For every $2 earned over the limit, $1 is withheld from your benefits.

2. The Year You Reach FRA

   • A more lenient earnings limit applies for the months before you reach your FRA. In 2023, this limit is $56,520.
   • For every $3 earned over the limit, $1 is withheld.

3. After Reaching FRA

   • No earnings limits apply, and your benefits are not reduced regardless of how much you earn.

Key Point: If your Social Security benefits are reduced due to excess earnings before reaching FRA, your monthly benefit will be recalculated at FRA to give you credit for the months benefits were withheld.

The Impact of Working on Social Security Disability Benefits

Social Security Disability Insurance (SSDI) is designed for individuals unable to work. However, certain parameters allow for limited work:

• Trial Work Period: Beneficiaries can test their ability to work for at least nine months. During this period, you earn full benefits regardless of earnings, provided you report your work activity and continue to have a disabling impairment.
• Substantial Gainful Activity (SGA): After the trial work period, benefits are suspended if earnings exceed the SGA threshold ($1,470 per month in 2023 for non-blind beneficiaries).

Tax Implications of Working While Collecting Benefits

Working while receiving Social Security benefits can make your benefits taxable, depending on your combined income (adjusted gross income + non-taxable interest + half of your Social Security benefits):

• Individual Filers:

  • If total income exceeds $25,000, up to 50% of benefits may be taxed.
  • If total income exceeds $34,000, up to 85% of benefits may be taxed.

• Joint Filers:

  • Combined income over $32,000 can result in up to 50% of benefits being taxed.
  • Exceeding $44,000 can lead to up to 85% being taxed.

Making the Decision: Factors to Consider

Deciding to work while collecting Social Security should be a personal decision influenced by several factors:

• Financial Needs: Assess if the additional income is necessary.
• Lifestyle and Health: Consider how continuing to work aligns with your lifestyle and health.
• Impact on Benefits: Evaluate how your work will affect your current and future Social Security benefits.
• Tax Implications: Consider the potential increase in taxable income.

Examples of Working and Collecting Social Security

• Example 1: Julia, age 64, works part-time earning $25,000 annually while collecting benefits. Since she earns above the threshold, her benefits are partially reduced until she reaches FRA. Afterward, her full benefits resume regardless of earnings.

• Example 2: Miguel, receiving SSDI, starts a part-time job under the trial work period, earning $900 monthly. His benefits remain unaffected during this phase, giving him the opportunity to explore work capacity without losing support.

Common Questions and Misunderstandings

Can I pause my Social Security benefits if I decide to work full-time again? Yes, you can choose to suspend your benefits at FRA or later, allowing them to grow until age 70.

Will working increase my future Social Security benefits? If your current income is among your highest-earning years, it could boost your average indexed monthly earnings, leading to higher benefits.

Does volunteering count as work affecting benefits? Volunteer work does not impact your Social Security benefits unless you receive compensation equivalent to wages.

Summary and Recommendations

Deciding to work while collecting Social Security is multifaceted, involving financial, personal, and administrative considerations. Planning is crucial:

• Evaluate Your Financial Needs: Make sure you understand your financial situation and how extra earnings will impact your lifestyle.
• Understand Impact on Benefits: Be informed about thresholds and recalculations to make an educated decision.
• Consult Financial Experts: Professionally guided advice can ensure you optimize your financial strategy.

For additional detailed information and tools, the Social Security Administration (SSA) website is a valuable resource. It provides calculators and estimators to help you plan more effectively.

Engage with your financial advisor or use SSA resources to help anticipate and plan for the impacts of working while receiving Social Security benefits. This proactive approach ensures a balance between earning additional income and maximizing your Social Security advantages.