Pros and Cons of Working While Collecting Social Security

Can you work and receive Social Security retirement benefits at the same time? Yes. Should you? Well, that depends. It’s important to understand that the issue isn’t only whether working will affect your benefit, but when you start receiving your benefits.

Retirement Benefits: There’s a Carrot, and There’s a Stick

If you still think of 65 as “retirement age,” think again. Due to very real concerns about future funding for the program and the fact that lots of Baby Boomers are retiring now, the SSA wants you to wait longer to start drawing benefits.

The Social Security Administration (SSA) allows you to start taking your retirement as soon as you turn 62 years of age. If your finances are tight, this can provide valuable income. However, the amount you receive will be significantly less than your “full” benefit. When can you get that? Well, it’s an upwardly sliding target depending on the year you were born. Check out this chart.

But there’s another catch. If you keep waiting past your full retirement date, you will be rewarded with increased benefits – 8% higher for every year you wait. This stays in play until your 70th birthday. Your benefit is now set, except for any future cost of living increases. If you can afford to wait, even if it means tightening your belt for two or three years (or continuing to work longer than you really want to), you will have higher future retirement income.

You can be sure that your living costs will increase in the future – inflation is certainly top-of-mind for seniors right now – so, in effect, your benefit will become functionally smaller over time. The bigger the maximum amount is, the better off you will be.

Benefits of Continuing to Work

You will receive dual incomes, which can:

• Help defray daily living expenses
• Pay for lifestyle “treats” such as more dining and entertainment or that special vacation you’ve dreamed of
• Continue building savings for when you can no longer work, or want to retire for real

But there’s another reason to keep working, especially if you are earning more than you did early in life. Once you formally retire, SSA calculates your benefit based on your 35 “best” earning years. So waiting could factor in more higher-income years.

The Downside

If you elect to receive retirement benefits before your full retirement age and also work, your benefit will be reduced -- $1 less for every $2 earned up to $19.650. (This is the cap for 2022, it changes every year.)

Once you reach full retirement age, then you can earn as much as you want without any retirement benefit reduction. That change takes effect in the month of your birthday. So, for example, if yours is in May, your Social Security check will be reduced only in January through April, but not afterward. You can read all the details about this here.

To be clear, when SSA talks about “earnings” they mean only the income you receive from working. If you receive other income from dividends, etc., that will have no effect on your Social Security check calculation.

Should You Retire Now? Should You Keep working?

The bottom line here is that you can continue working as long as you want, though it might have an impact on your retirement benefit and/or taxes depending on your age. The more important question is when to start taking retirement benefits. And that’s a question only you can answer based on your personal finances and expected future needs.

Consolidate Your Living Expenses

At Magnolia Manor, all of your living expenses are consolidated into one low monthly fee that covers housing, utilities, maintenance, landscaping, housekeeping, daily activities, and more. Our free online cost calculator will compare your current living expenses to those of Magnolia Manor, so you can see for yourself how affordable senior living can be. To learn more about senior living at one of our nine senior living communities, contact us online or give us a call at 855-540-LIFE (5433).