Can You Collect Social Security While Working? Know Income Limits & Age

Social Security is a critical part of financial planning for retirement, providing monthly benefits to retired, disabled, and survivor beneficiaries.

If you’re nearing retirement age, it’s essential to understand how much you can expect to draw from Social Security and how your income during your working years influences the amount you receive.

This guide will break down the factors that impact your Social Security benefits and how you can maximize your payouts.

Social Security Overview

Social Security was created in 1935 as a part of the Social Security Act, signed by President Franklin D. Roosevelt.

The program aims to support Americans in retirement, those with disabilities, and the surviving spouses and children of deceased workers. By 2024, Social Security is expected to serve more than 71 million people.

In 2024, the average monthly benefit for a retired worker is $1,907, which equates to around $23,000 per year. However, the amount you receive depends on your age, earnings, and how long you’ve worked.

Can You Collect Social Security While Working?

Yes, you can collect Social Security benefits while still working, but there are rules and income limits to consider if you’re not at full retirement age (FRA). Here’s how it works:

• Full Retirement Age (FRA): The age at which you can claim full Social Security benefits depends on your birth year.
  • Born 1943-1954: FRA is 66
  • Born 1955-1959: FRA gradually increases to 67
  • Born 1960 or later: FRA is 67

If you claim Social Security before reaching FRA, the SSA reduces your benefits if you earn more than the annual earnings limit. For 2024, the earnings limit is $22,320. If you earn more than this, $1 is deducted from your benefits for every $2 you earn over the limit.

For example, if Jamal, aged 63, earns $50,000 per year while claiming Social Security benefits, his benefit reduction is calculated as:

1. $50,000 – $22,320 = $27,680 (amount over the earnings limit)
2. $27,680 ÷ 2 = $13,840 (annual reduction in benefits)
3. $13,840 ÷ 12 = $1,153.33 (monthly reduction)

So, Jamal’s monthly benefit would be reduced by $1,153.33, lowering his overall Social Security payout.

Once you reach FRA, there is no penalty for working and receiving Social Security benefits.

Earning Credits for Social Security

To qualify for Social Security benefits, you need to accumulate 40 credits over your working life, which is equivalent to 10 years of work. In 2023, you earn one credit for every $1,730 in covered earnings, and you can earn up to four credits per year.

The more years you work and the higher your earnings, the higher your Social Security benefit. The SSA calculates your benefit based on your highest 35 years of earnings, so if you work fewer years, zeros are included in the average, reducing your benefit.

Social Security Income Limits and Age

The amount you can draw from Social Security depends on when you start claiming benefits and how much you earned during your working years. Here’s how it works:

• Claiming Early (age 62): You can start claiming Social Security benefits as early as age 62, but your benefit is reduced by up to 30% if you were born in 1960 or later.
  • Maximum monthly benefit at age 62 in 2024: $2,710
• Full Retirement Age (age 67): If you wait until your FRA (67 for those born in 1960 or later), you’ll receive your full benefit.
  • Maximum monthly benefit at age 67 in 2024: $3,822
• Delayed Retirement (up to age 70): You can increase your benefit by 8% for each year you delay taking Social Security after FRA, up to age 70.
  • Maximum monthly benefit at age 70 in 2024: $4,873

Delaying Social Security benefits until age 70 can increase your monthly payout by 32% compared to claiming at FRA.

Social Security and Retirement Planning

Although Social Security is a significant source of income in retirement, it is not meant to be your sole source.

As Diana Pringle, CEO of Wealth Advisors of the Great Lakes, points out, Social Security was designed to be just one leg of a “three-legged stool,” with the other two legs being personal savings and pensions. For a comfortable retirement, it’s important to save and invest outside of Social Security.

Example: Retirement Income at Age 67

If you retire at age 67 in 2024 and have a history of high earnings, you may be eligible for the maximum benefit of $3,822 per month. Over a year, this adds up to $45,864, but if your living expenses exceed that, you’ll need additional income from pensions, savings, or investments.

Maximizing Your Social Security Benefit

To maximize your Social Security benefits:

1. Work for at least 35 years: The SSA uses your 35 highest-earning years to calculate your benefit. If you work fewer than 35 years, zeros are factored into the calculation, reducing your payout.
2. Delay benefits: If possible, wait until age 70 to start claiming Social Security. For each year you delay after your FRA, your benefit increases by 8%.
3. Monitor your earnings: Ensure that all your earnings are recorded correctly with the SSA. Review your Social Security statement annually to check for discrepancies.

Social Security can provide a substantial portion of your retirement income, but it’s important to understand how your age, earnings, and work history impact your benefits.

If you start claiming benefits early, your monthly payout will be lower, and working while receiving benefits can reduce your payments if you’re under full retirement age.

To maximize your retirement income, delay benefits if possible and plan to supplement Social Security with savings or pension income.

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