I Started Social Security at 67. Does Continued Work Mean a Higher Payout?

Key Points

• Social Security benefits are calculated using your 35 highest-earning years adjusted for inflation.

• Working in retirement only increases benefits if current earnings exceed the lowest year in your top 35.

• Delaying Social Security past full retirement age increases benefits by roughly 8% per year until age 70.

• If you’re thinking about retiring or know someone who is, there are three quick questions causing many Americans to realize they can retire earlier than expected. take 5 minutes to learn more here

Some people stop working the moment they retire, but many choose to keep a foot in the workforce. A part-time job or small business can offer meaningful advantages.

For one thing, the extra income can make a real difference. If you rely heavily on Social Security and have limited savings, even a modest paycheck can help you cover your expenses more comfortably. Beyond the financial benefits, working can also provide social and emotional perks. Having a job to go to a few afternoons a week gives structure to your days, helps fend off boredom, and creates opportunities to get out of the house and stay connected with others.

In a recent Reddit post, a 74-year-old who continues to work asked how their job might affect their Social Security benefits. They began collecting at age 67 and want to know whether their current earnings could change the amount they receive each month.

It is a reasonable question. Income earned later in life can influence Social Security benefits, but whether it does depends entirely on your lifetime earnings record.

How Social Security benefits are calculated

Your Social Security benefits are based on the income you earned during your 35 highest-paid years. Earlier wages are adjusted for inflation to calculate the benefit you are entitled to at your full retirement age, which is 67 for anyone born in 1960 or later.

You can start claiming Social Security as early as age 62, but doing so comes with a reduction. Each month you claim before reaching full retirement age permanently lowers your monthly benefit.

On the other hand, you can delay filing past your full retirement age to boost your payments. Benefits grow by about two-thirds of 1 percent for every month you wait, which works out to roughly an 8 percent increase for each full year you delay, up until age 70. After 70, the increases stop, so there is no financial advantage to waiting beyond that point.

How working later in life can affect your Social Security benefits

The poster’s question is a valid one, because the wages they are earning at age 74 might affect the size of their monthly Social Security checks. But it is also possible that their current income will not change anything at all.

As noted earlier, Social Security calculates your benefit using your 35 highest-earning years. Suppose the lowest year within the poster’s top 35 was 30,000 dollars. If they are now earning only 15,000 dollars a year from part-time work, that income would not replace any of their top earning years, so their benefit would stay the same.

But if they are now earning 35,000 dollars a year, that changes the picture. Since 35,000 dollars is higher than the lowest year in their top 35, the Social Security Administration would eventually update their record, swap out that lower year, and recalculate their benefit. That could lead to an increase in their monthly payment.

This is also why it can be beneficial for retirees who do not yet have a full 35-year work history to take on at least some part-time work. Even modest wages can replace a zero-income year in the formula and potentially raise future Social Security checks.

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