En español | Q: At 62, I'm still earning about $80,000 a year, so even if I start collecting Social Security benefits — about $1,800 a month — it will not help me much because I will be over the $15,120 a year earnings limit. And thus most of my benefits will be withheld. But if I do take Social Security at 62, and I keep working, will there be any favorable adjustment to my benefit when I get to 66, my full retirement age?
A: Actually, at $80,000 a year, all your benefit would be withheld, based on Social Security's formula of holding back $1 of benefit for every $2 that you make over the earnings limit. So you'd be better off not applying at all. Even if you did start getting a check, you'd have to give all the money back later on.
But let's suppose that you start benefits at 62 but only make $40,000 a year. Some but not all of your benefits will be withheld. But when you get to 66, several things will happen. Social Security will recalculate your monthly amount, giving you credit for any payments that were withheld during the time when you earned more than the annual earnings limit. You won't get a lump sum restoring all those lost payments, but your monthly payment will rise with the aim of making you whole over time.
In addition, the earnings limit will go away during the month that you turn 66. From that point on, you will be free to earn as much as you wish.
Meanwhile, your benefit could increase for another reason. During the years that you work and contribute to Social Security, the agency keeps track of your annual earnings. Social Security computers look at your highest 35 years of earnings and use that information to calculate your monthly benefit. If your earnings record shows a few years when you earned less than the annual amounts you make after 62, those lower earnings years could be replaced by the higher earnings that you now enjoy. That, in turn, could cause Social Security to increase your monthly benefit. So continuing to work may have unexpected advantages.
Stan Hinden, a former columnist for the Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question for the Social Security Mailbox? Check out the archive. If you don't find your answer there, send a query.