Returning to work after retiring can have an impact on the Social Security you may be collecting, with the factors depending on the timing and circumstances, according to financial advisers and the recent article, “Unretiring: Why Recent Retirees Want to Go Back to Work,” published by the global investment management firm T. Rowe Price.
Author Judith Ward, a certified financial planner, notes that if a person has not claimed his or her benefits when they initially retired, “unretiring allows you to delay claiming even further. The longer you delay claiming your benefits (up until age 70), the higher your monthly benefits, which increase by 8% for every year past your FRA (full retirement age) that you delay receiving them, until you reach age 70. The converse is true, too: Filing early — at age 62 — can lead to an almost 30% reduction in benefits.”
If people stop working before their full retirement age, “and claimed benefits but then decided to go back to work,” they have a year “to apply for a withdrawal of benefits.” She notes the worker would need to repay what he or she received, and “Social Security will act as if you never took benefits in the first place.”
“If you have reached your (full retirement age) but are not yet 70, you can suspend payments and earn delayed retirement credits, increasing your monthly benefit.”
People who work prior to full retirement while receiving benefits can reduce the size of their benefits because of income limitations. If you exceed the 2024 earned income limit of $22,320, “benefits will be reduced by $1 for every $2 you earn above the limit. (Benefits are recalculated once you reach FRA to give you credit for the months in which your benefit was reduced or withheld due to excess earnings.)”
Once a person reaches full retirement and continues to work, the amount of benefits is not affected. There is an exception to the upside: “Additional years in which you earn a high income could potentially increase your benefit,” Ward writes. “Your benefit is based on your best-paid years. It’s possible that a current wage could replace a lower or zero earning year for purposes of determining your Social Security benefit.”
“Ultimately,” Ward says, “it may be better to delay claiming benefits until (full retirement) or later while you are working.”
Avoiding pitfalls
Local advisers and analysts say many people who are near full retirement age or who are approaching it hurt their own cause by failing to compile a budget, being too generous toward family members, and refusing to adjust their lifestyles when their best earning years are behind them.
“I think the pain of the sandwich generation is well known, and we are talking about wage earners who are being stretched several ways at once, whether it’s caring for a parent, or trying to provide financial support to those who are younger or early in their financial journeys,” said Mark Hamrick, an economic analyst and Washington bureau chief at Bankrate.
Christian Martinez, a financial adviser at the Miramar-based Tropical Financial Credit Union, said it’s important to undertake detailed planning to ensure a worker doesn’t end up getting penalized by Social Security when they work and receive benefits at the same time.
“I tell people you want to engage in a part-time or flexible work arrangement without triggering a benefit reduction,” he said. “They need to just make sure they have a financial plan in place and they’re budgeting to account for their incomes from their work and their benefits.”
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