Working and Receiving Social Security Benefits Are Not Mutually Exclusive
It might sound strange, but you don't have to stop working altogether when you retire. You also don’t need to be fully retired in order to start receiving Social Security benefits. You just need to know the repercussions of each situation so you can choose the route that makes the most sense for you financially.
This is great news for those who might want to keep busy in retirement by working part-time, or for those that are perfectly content working until they no longer can.
Let’s take a further look at how this works out if you’re thinking of working in your retirement years.
Continuing to Work Despite Receiving Social Security
When you reach your full retirement age, you can continue to work and earn as much as you want and still receive your full Social Security benefit payment, no holds barred. If you haven't reached full retirement age, you are also able to receive Social Security benefits, but if your earnings exceed a certain amount, some of those benefits will be withheld.
(Full retirement age is between 65 to 67, depending on the year when you were born.)
That said, that doesn't necessarily mean you should try to limit your earnings. If fact, you could actually receive a higher monthly benefit amount when you reach your full retirement age under this scenario.
How Does This Work?
Once you reach full retirement age, your Social Security benefit amount is recalculated to give you credit for any prior months when your benefits were withheld due to your earnings. If you continue to work and receive benefits, your records will be reviewed every year to see whether your additional earnings will increase your monthly benefit.
In other words, if you want to work and earn more than the exempt amount, it won't reduce the total value of lifetime Social Security benefits you receive — it may actually increase them.
What You Need to Consider
If you didn’t realize you could continue to work while claiming social security, you might have a few things to figure out.
Start off by asking yourself if you want to continue working in any capacity in retirement. There’s no right or wrong answer here.
Some retirees choose to work part-time because they want the social interaction, and earning more money never hurts. On the other hand, there are retirees that refuse to work during retirement. After all, that’s how it’s mean to be enjoyed.
Additionally, if you’re younger than full retirement age and plan on receiving Social Security benefits, you need to make sure continuing to work and having some of your benefits withheld makes sense for you financially. Living on a fixed income can be a difficult challenge. You need enough coming in to support the lifestyle you want in retirement.
If you’re married, you should be including your spouse in on this decision as well. It affects both of you and your finances in retirement. For example, while you might want to work part-time, your spouse might want to spend more quality time together.
Weigh your options carefully and do the math when it comes to working and receiving benefits.