Can I Draw Social Security and Still Work?

It is generally possible to receive Social Security benefits while continuing to work. However, specific rules and considerations apply, particularly concerning how earnings may affect benefit amounts and how benefits are taxed. Understanding these regulations is important for individuals navigating the transition into retirement while maintaining employment. This article provides essential information for those in this situation, covering earnings limits, taxation, reporting requirements, and how continued work can impact future benefits.

Drawing Social Security While Working

Individuals can receive Social Security benefits while employed, but earnings can influence the amount received, especially before Full Retirement Age (FRA). FRA is the age, determined by your birth year, when you receive your full Social Security benefit. For those born in 1960 or later, FRA is 67.

If you are below your Full Retirement Age for the entire year and receive Social Security benefits, there is an annual earnings limit. For 2024, this limit is $22,320. If your earnings exceed this amount, the Social Security Administration (SSA) will deduct $1 from your benefits for every $2 you earn over the limit.

In the year you reach your Full Retirement Age, a different earnings limit applies for the months leading up to your FRA birthday. For 2024, this limit is $59,520. If your earnings surpass this threshold before your FRA month, the SSA will deduct $1 from your benefits for every $3 you earn over the limit. Once you reach your Full Retirement Age, there are no longer any earnings limits, and your benefits will not be reduced regardless of how much you earn.

Benefits withheld due to exceeding earnings limits are not permanently lost. They are factored into a recalculation process at your Full Retirement Age. The SSA keeps a record of the months benefits were withheld. At your FRA, your monthly benefit amount will be adjusted upward to account for these withheld benefits, effectively giving you credit for the months you did not receive a payment due to your earnings. This adjustment means you receive a higher monthly benefit going forward.

Taxation of Social Security Benefits

Social Security benefits can be subject to federal income tax, depending on your total income. The Internal Revenue Service (IRS) uses “combined income” to determine if your benefits are taxable. Combined income is your Adjusted Gross Income (AGI), plus any nontaxable interest, plus one-half of your Social Security benefits.

If your combined income exceeds certain thresholds, a portion of your Social Security benefits may be taxed. For a single filer, if your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If your combined income is over $34,000, up to 85% of your benefits may be taxable. For those married filing jointly, if your combined income is between $32,000 and $44,000, up to 50% of your benefits may be taxable.

For married filers, if combined income is over $44,000, up to 85% of benefits may be taxable. These thresholds are fixed by law and are not adjusted for inflation, meaning more beneficiaries may find their benefits taxable over time. Some states may also tax Social Security benefits, though this varies by state.

Reporting Earnings and Navigating the System

Individuals receiving Social Security benefits while working are responsible for reporting their earnings to the Social Security Administration (SSA). This reporting ensures accurate benefit payments and prevents potential overpayments. The SSA primarily uses W-2 forms for wage earners and self-employment tax returns for self-employed individuals to verify earnings.

If your earnings significantly change or you anticipate exceeding the earnings limits, proactively informing the SSA can prevent issues. You can report changes in your earnings estimate online, by phone, by mail, or in person at a local Social Security office. Providing updated earnings information allows the SSA to adjust your benefits in advance, reducing the likelihood of an overpayment.

The SSA conducts an annual review of beneficiaries’ earnings records after tax season. If actual earnings reported to the IRS differ from estimates, the SSA will adjust benefit payments. If you received more benefits than entitled due to higher earnings, the SSA will notify you of the overpayment amount. They will then reduce future monthly benefits until the overpayment is recovered, or you may be required to repay the amount directly.

How Continued Work Affects Future Benefits

Continuing to work while receiving Social Security benefits can positively impact your future benefit amounts through recalculation. The Social Security Administration annually reviews beneficiary earnings records. If your current year’s earnings are among your highest 35 years, they can replace a lower-earning year in your historical record.

This replacement increases your primary insurance amount (PIA), the base figure used to calculate your monthly Social Security benefit. A higher PIA translates to higher monthly benefit payments in the future. This recalculation occurs automatically, ensuring your benefit amount reflects your most current and highest earnings.

If your benefits were reduced or withheld before your Full Retirement Age due to exceeding annual earnings limits, these withheld payments are not permanently lost. At your Full Retirement Age, the SSA performs a special recalculation. They account for the months your benefits were reduced or withheld due to your work earnings. This adjustment results in a higher monthly benefit amount going forward.

Delaying your claim beyond your Full Retirement Age can also lead to increased benefits through Delayed Retirement Credits (DRCs). DRCs provide an additional percentage increase for each month you delay claiming up to age 70.