How Will Working Affect Social Security Benefits?

As more seniors choose to remain in the workforce beyond traditional retirement age, understanding the implications of working on Social Security benefits has become increasingly important. 

1. Collecting Social Security While Working

It is entirely possible to receive Social Security retirement benefits while still working. However, the amount you earn can affect your benefit payments, especially if you have not yet reached your full retirement age (FRA). The Social Security Administration (SSA) allows beneficiaries to work, but there are specific rules regarding earnings limits and benefit reductions. 

In 2025, you earn one credit for every $1,810 in covered earnings, up to a maximum of four credits per year. These credits determine your eligibility for future benefits. 

2. Earnings Limits and Benefit Reductions

The SSA imposes earnings limits that dictate how much you can earn without affecting your Social Security benefits: 

• Before Full Retirement Age: If you are under your FRA for the entire year, you will lose $1 in benefits for every $2 you earn over an annual limit of $23,380 in 2025. For instance, if you earn $30,000, your benefits would be reduced by $3,310 for the year. 

• In the Year You Reach Full Retirement Age: Once you reach FRA, the reduction becomes less severe. For earnings above $62,080 in 2025, the SSA will deduct $1 from your benefits for every $3 earned until the month you reach FRA. After reaching FRA, there is no limit on earnings; you can keep all of your benefits regardless of how much you earn. 

These reductions are temporary; once you reach FRA, the SSA recalculates your benefit amount to account for any months where benefits were withheld due to excess earnings. This means that although your monthly checks may be lower initially, they can increase later on. 

3. Impact on Spousal Benefits

Working while collecting Social Security can also affect spousal benefits. If you are receiving benefits based on your spouse’s work record and continue to work: 

• Your earnings could reduce both your benefits and those of your spouse if they are also collecting based on your work history. 

• Additionally, higher combined income may lead to increased taxes on both your and your spouse’s benefits. 

It’s crucial to consider how working may impact not just your financial situation but also that of your spouse. 

4. Tax Implications

Working while receiving Social Security can also affect your tax situation. If your combined income (including wages and Social Security) exceeds certain thresholds, a portion of your Social Security benefits may become taxable: 

• For individuals with a combined income between $25,000 and $34,000 (or between $32,000 and $44,000 for married couples), up to 50% of Social Security benefits may be subject to tax. 

• If combined income exceeds these thresholds, up to 85% of benefits could be taxable. 

Understanding how working affects both your benefit amounts and tax liabilities is essential for effective retirement planning. 

5. Long-Term Benefits of Working

Despite the potential reductions in benefits while working before reaching FRA, continuing to work can have positive long-term effects on your Social Security income: 

• Higher Earnings Years: If you earn more during your working years than in previous years used to calculate your benefit amount (the SSA considers the highest 35 years of earnings), it could lead to a higher monthly benefit when recalculated. 

• Delayed Benefits: By continuing to work and delaying claiming Social Security until after reaching FRA or even until age 70, you can maximize your monthly benefit amount due to delayed retirement credits. 

Working while receiving Social Security benefits can be a smart financial move, but it’s important to understand how it affects your benefits both in the short and long term. Consider consulting with a financial advisor to develop a strategy that maximizes your Social Security benefits while accounting for your other sources of retirement income. 

This information was partly provided by Claude.ai and the IRS 

Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. 

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Jonathan Meaney and not necessarily those of Raymond James. 

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.