Am I Able to Get Social Security Retirement Benefits if I'm Working?

Claiming while working is possible, but consider it carefully

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In the past, most of the workforce may have had a more clear-cut approach to retirement. You worked long hours for roughly four decades and at around the age of 65, you retired. Of course, there were plenty of people who didn’t follow the traditional path, but today, the dividing lines for retirement are much less clear. The Great Recession of 2008 pushed retirement back for many people.

 Some people consider working and collecting Social Security benefits. The question is, can you get Social Security retirement benefits while still actively working? The answer is yes, but consider this choice carefully. Here are a few things to look at first.

Earn Your Credits

The point of Social Security is to have consistent income once you retire, but you first have to pay into the program by earning credits. In 2019, you need to earn at least $1,360 to receive one Social Security credit, and you can earn a maximum of four credits per year. This equates to $5,440 in 2019. For 2020, you need to earn at least $1,410 to receive one Social Security credit, or $5,640 to earn all four credits for the year.

If you were born in 1929 or later, you need 40 credits, or 10 years of earning the minimum amount to receive full retirement benefits. For many people, this may be an easy goal to achieve. 

The amount you must earn to receive one credit adjusts each year.

Before you make a decision on taking benefits while still working, contact Social Security and check your credit balance. If you haven’t yet earned your 40 credits by age 62, consider working a few more years. If you don’t have the required credits, you aren’t eligible for Social Security retirement benefits unless you qualify for other types of benefits.

Learn About the Ages

Social Security offers retirement benefits based on age. Here’s a brief rundown of the ages you should know.

 Full retirement age is between 65 and 67, depending on the year you were born. The younger you are, the higher your retirement year. Once you reach full retirement age you can work as much as you would like without it having any impact on your Social Security benefits. 

If you were born after 1959, your full retirement age is 67. 

You can’t receive Social Security retirement benefits until you reach the age of 62, so working and receiving benefits isn’t possible until you reach that age.

The younger you are when you start receiving benefits, the less you will receive. For example, if you start receiving benefits at age 62, your monthly benefit amount is reduced by 30% for the rest of your life. The longer you wait, the more you keep, and if you wait until after full retirement age, your checks are even higher.

You can delay retirement until you’re 70 years old if you’d like, which is past your full retirement age. This may allow you to earn the highest Social Security benefit possible. 

Consider the Penalties

While the Social Security Administration seeks to keep your contributions as long as possible so the money can be distributed to a larger pool of payees, it does provide information about working while receiving benefits in your retirement years.

 If you’re below your full retirement age but are 62 years or older, you can work and receive Social Security benefits at the same time. If you are achieving normal retirement age in 2020, you can earn up to $17,640 in 2019 and still receive your normal benefit amount without any penalty. In other words, if you want to work and collect benefits, you can do it as long as you stay below the $17,640 annual income threshold. For those achieving normal retirement age in 2021, you can earn up to $18,240 in 2020 without penalty. The limit applies to the year before you reach normal retirement age.

 If you earn more than the maximum annual income limit in one year, Social Security will withhold $1 for every $2 you earn above that threshold. For example, let’s say that you are age 63 and earn $35,000 in 2019. Social Security will withhold $8,680 from your benefits check. That equates to a loss of $723 each month on top of the 25% benefit reduction for taking benefits before reaching full retirement age. That’s a big financial hit.

 Once you reach full retirement age, things change. If you are achieving normal retirement age in 2019, you can earn up to $46,920 during the months leading up to your birthday before getting penalized. So if you earned that same $35,000, you wouldn’t receive a penalty. But if you earned $55,000, Social Security would withhold $1 for every $3 you earned over the limit. So on your $55,000 earnings, you’d lose $2,693, or $224 per month, leading up to the month you achieve normal retirement age. This penalty is far less severe because you’re so close to full retirement age. If you’re achieving normal retirement age in 2020, the limit is $48,600. This limit applies to the year in which you achieve retirement age.

Anything you earn after reaching normal retirement age is yours to keep and your monthly benefits will not be reduced.

Do You Get the Money Back?

Unfortunately, the answer is no. Once Social Security collects the money from the penalty, you won’t get it back in the form of a higher benefit amount. This is because it’s not technically a withholding, it is a type of penalty. However, once you reach full retirement age, your benefit amount will be recalculated without the earnings penalty and should increase to your full amount. But remember, because you took benefits prior to full retirement age, your check will not be as large as if you had waited.

Tax Implications

Another issue with receiving Social Security benefits while working is the potential tax liability. If you and your spouse are married filing jointly and earn more than $44,000, up to 85% of your Social Security benefit may be taxable. If you and your spouse are married filing jointly and have combined earnings between $32,000 and $44,000, up to 50% of your benefits may be taxable.

If you’re not married, filing single, and earn more than $34,000, up to 85% of your Social Security benefits may be taxable. If you earn between $25,000 and $34,000, up to 50% of your benefits may be taxable.

About 40% of all people receiving Social Security benefits have to pay taxes on them.

You Have to Estimate Your Earnings

You have to provide Social Security with an estimate of what you expect to earn so the agency can adjust benefits accordingly. If the estimate isn’t provided and a filer goes over the annual earnings limit, the worker may get a letter demanding repayment of a portion of the Social Security benefits they received.  

The Bottom Line

Most financial planners agree that waiting to take benefits until you reach full retirement age may be best, if you can afford to do that. If you can’t wait and must take benefits prior to full retirement age, you should consider only working up to the earnings limit for that year to avoid hurting yourself financially. The penalty for exceeding the annual income limit, plus the reduced benefit amount that comes from taking Social Security benefits prior to full retirement age, is a loss of benefits that doesn’t make sense in most cases.

Although it seems like continuing to work once you’re in your retirement years will produce more income, that may not necessarily be true when Social Security is involved. Because Social Security benefits can be complicated, especially when combined with other financial factors in your life, it may be best to talk to a financial planner about the best way to maximize your benefits.

Article Sources

  1. EBRI.org. "Changes in Later-Than-Expected Retirement After the Great Recession," Accessed Dec. 9, 2019.

  2. Social Security Administration. "Getting Benefits While Working," Accessed Dec. 9, 2019.

  3. Social Security Administration. "2020 Social Security Changes," Accessed Dec. 9, 2019.

  4. Social Security Administration. "Social Security Credits," Accessed Dec. 9, 2019.

  5. Social Security Administration. "Retirement Age Calculator," Accessed Dec. 9, 2019.

  6. Social Security Administration. "Retirement Benefits," Accessed Dec. 9, 2019.

  7. Social Security Administration. "Benefits Planner: Retirement," Accessed Dec. 9, 2019.

  8. Social Security Administration. "Understanding the Benefits," Page 2, Accessed Dec. 9, 2019.

  9. Social Security Administration. "Exempt Amounts Under the Earnings Test," Accessed Dec. 9, 2019

  10. Social Security Administration. "Income Taxes And Your Social Security Benefit," Accessed Dec. 9, 2019.

  11. Social Security Administration. "Benefits Planner | Income Taxes And Your Social Security Benefit," Accessed Dec. 9, 2019.

  12. Social Security Administration. "What You Need to Know When You Get Retirement or Survivors Benefits," Page 6, Accessed Dec. 9, 2019.