If you’ve recently retired and started collecting Social Security, you may be appreciating your newfound freedom from having to go to work. But it’s not a given that you’ll stop working completely once you reach a certain age.
Many seniors opt to work for a variety of reasons. And the good news is that Social Security will allow you receive benefits plus a paycheck from a job.
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If that’s a situation you’re about to get into, you should know that there could be a number of benefits. But there’s one big drawback that might trip you up. Here are three pros and one con of working while getting Social Security.
Pro No. 1: Extra income
The average Social Security recipient today collects about $1,981 per month. If you have a nice pile of savings on top of your benefits, you may be doing just fine, financially speaking. But if you have limited or no savings, you may be struggling on just Social Security. The upside of working is getting to supplement your benefits — and having less financial stress.
Pro No. 2: Your income could result in larger Social Security checks
Social Security takes your 35 highest-paid years of income into account when calculating your monthly retirement benefits. But it may be that you’ve gotten to retirement without a complete 35-year work history. If you earn money from a part-time job, even if you’re already getting benefits, Social Security will use that income in its formula to calculate your monthly check amount. So after a while, you may find that your monthly benefit is adjusted upward.
Pro No. 3: You’ll have a way to stay busy and enjoy the company of others
Many people end up unhappy in retirement because they’re bored and don’t have enough things to do with their days. If you secure part-time work, you’ll have a place to go a few times a week, and you may find it easier to establish a steady routine, which is something a lot of people need. Working could also serve as a social outlet, which is important if you don’t have such a large network of family or friends.
And now, the big drawback
While there’s clearly lots to be gained by working while receiving Social Security, there’s a big con to know about — you could have some of your benefits withheld if your paycheck is too large. This risk only exists if you’re collecting Social Security before having reached full retirement age, though. Once you get to full retirement age, you can earn any amount of money from a job without a negative impact on your monthly Social Security checks.
If you want to avoid having some of your Social Security income withheld, you’ll need to make sure your job-related earnings stay below the earnings-test limit. This year, the limits are $23,400 or $62,160. The latter applies if you’ll be reaching full retirement age later on in 2025.
If you go over the earnings-test limit, you’ll have $1 in Social Security withheld per $2 or $3 in wages, depending on your age. And while your withheld benefits won’t be lost forever, you may have to wait a while to get that money paid back to you.
Meanwhile, if you’re in a position where the earnings-test limit applies to you, it means you’ve also reduced your Social Security benefits permanently by claiming them prior to full retirement age. You don’t want to take that long-term hit on your benefits and also lose some of that income due to earning too much if you can help it.
All told, there are plenty of good reasons to take a job in retirement, even if it’s just a few hours a week. But be mindful of the earnings-test limit if you decide to work while on Social Security and you haven’t yet gotten to your full retirement age.
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