“Retirement” used to be synonymous with “not working.” Not anymore.
More than a quarter of U.S. adults ages 65 to 74 are still in the workforce, according to the federal Bureau of Labor Statistics, and that share has been rising steadily for decades. Nearly three-quarters of currently working adults polled for the Employee Benefit Research Institute’s 2023 Retirement Confidence Survey said they expect to continue working for pay in retirement.
Some need the income to cover their bills. Some like the job they have, hanker for a second career or simply want to stay busy. And many are also receiving Social Security.
Buttressing your paycheck with a Social Security check can be tempting. “Who doesn’t want extra money?” asks Spencer Betts, a certified financial planner with Bickling Financial Services, a Boston-area firm. But that extra money can come with a significant downside.
Social Security maintains a “retirement earnings test” for people who claim benefits before reaching full retirement age (FRA), currently between 66 and 67 depending on your year of birth. If your work income exceeds a certain threshold, the Social Security Administration (SSA) temporarily withholds a portion of your monthly payment. That’s on top of the benefit reduction that comes with starting Social Security before FRA.
The test is a legacy of a founding principal of Social Security. When President Franklin D. Roosevelt signed the program into law in 1935, it was intended to support those no longer able to earn money from work. Amendments enacted four years later set the earnings limit at $15 a month (about $332 in 2023 dollars).
The policy has substantially evolved since then, but the idea essentially is the same: You get your entire benefit when the SSA considers you fully retired.
That’s news to many newly minted beneficiaries. Fewer than half of U.S. adults ages 25 to 66 surveyed by AARP for a November 2023 report on Social Security knowledge were aware that holding a $40,000 job while collecting retirement benefits at age 62 would reduce their monthly payments.
And when Social Security discovers it’s been “overpaying” you while you’re working, it will seek to get that money back.
“A lot of people don't even realize there's an earnings limit until they receive their first overpayment notice,” says Jim Blair, a former SSA district manager in Ohio and the cofounder of Premier Social Security Consulting in Cincinnati.
In 2024, the earnings limit for most Social Security recipients under full retirement age is $22,320 (up from $21,240 in 2023). Work income up to that level is exempt, but you lose $1 in benefits for every $2 in earnings over the cap. Suppose you have a part-time job that pays $40,000 a year. Your benefits for 2024 would be reduced by $8,840 — half the difference between $22,320 and $40,000.
It isn’t just income from a salaried job. “That includes earnings from W-2 wages, but also the net self-employment income if they're driving an Uber or something,” says Luis Rosa, a certified financial planner at Build a Better Financial Future in Pasadena, California.
Here are seven things you need to know if you continue to work while receiving Social Security.