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Are My Benefits Forever Frozen?

Continuing to work can raise your monthly payment after you start collecting

Q. I'm 66 and I'm going to start collecting Social Security. But I'm also going to continue to work. Will I still have Social Security taxes taken out of my wages and, if so, will my benefit increase? Or, is that figure frozen once I start collecting?

A. Well, friend, there's some good news and some bad news here.

See also: Tell your Social Security story to the world.

The bad news, not surprisingly, involves taxes. When you continue to work after taking your Social Security, your employer will continue to withhold Social Security and Medicare taxes from your pay. In addition, the benefits you receive from Social Security will be added to your wages and you may have to pay federal income taxes on a portion of the benefits.

The good news is that remaining at work could boost your future Social Security payments.

Here's the way it works: When you apply for benefits, Social Security will review your earnings history and will come up with an average for your highest-paid 35 years of work. That number, after adjustments, will form the basis for your monthly Social Security check. Down the road, if your earnings in any year are greater than in one of those 35 years, Social Security will recalculate your benefits and pay you any increase that's due.

You're going to start taking benefits at 66, but this same process would apply if you started earlier or later.

For more information, see "Paying taxes on earnings while receiving Social Security benefits" on the Social Security website.

Also, see "How Work Affects Your Benefits."

And, if I may suggest, check out the archives for my column and scroll down to the section under "Taxes." Other people have asked questions similar to yours.

Also of interest: Calculate when to collect Social Security. >>

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.

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