social security

How Does Working Longer Affect Your Social Security Benefits?

You probably know you’ll get bigger payments if you stick with your job and wait to claim. But there’s more to it.

If you’re like many seniors, Social Security benefits will make up the majority of your income during retirement. According to the Center on Budget and Policy Priorities, half of older Americans rely on Social Security for at least 50% of their income, and 25% rely on it for 90% of their income.

You may be working longer, too. U.S. workers between 62 and 65 are working at the highest rates since data began being recorded in the 1960s. And those over 65 are about twice as likely to be working today as those in 1985, with around 20% still in the workforce (though there was a slight downturn during the pandemic).

To me, the first set of statistics highlights the importance of Social Security benefits to your retirement life — and the need to maximize those benefits. The number of Americans working longer tells me that a lot of you may want to know how working longer can affect your benefits, and how you can make the most of those earning years.

Social Security & Working Past ‘Retirement’

Some people who work longer delay receiving Social Security benefits so those benefits can grow. As you probably know, you can increase your Social Security benefits by delaying the date at which you begin receiving them. In other words, the longer you wait to collect your benefits, the bigger your benefit (until age 70, at which point they stop growing). You can use the Social Security Administration (SSA)’s calculator to figure out how much you could earn by waiting.

I think there’s another, unsung perk to working longer: You could increase your benefits by delaying credits and by bumping up the earnings numbers used to calculate those benefits. Social Security calculates your monthly benefit by using your 35 highest-earning years (until age 70). As long as you keep working and paying into Social Security, your earnings record will keep being updated. If the money you make in later years outweighs what you made earlier, your benefits will increase accordingly.

Some Pros to Working Longer (And a Few Heads-Up)

Working past the more traditional retirement age of 65 may boost more than your Social Security benefits.

  • Any future spousal benefits would increase, too.
  • You may stay sharper. Several studies show that people demonstrate higher mental acuity if they continue to work. These studies show it’s likely due to the social networks and mental challenges of work.
  • You may save money by sticking with your employer’s healthcare instead of using Medicare, especially if your spouse is covered by your plan and not eligible for Medicare. The rules around signing up for Medicare can be complicated, but Medicare.gov says, “Generally if you have job-based health insurance through your (or your spouse’s) current job, you don’t have to sign up for Medicare while you (or your spouse) are still working. You can wait to sign up until you (or your spouse) stop working, or you lose your health insurance (whichever comes first).” There are exceptions, though, and you may want to consider delaying Part B but sign up for Part A because it’s free. Be aware: If you enroll in Medicare, even just Part A, you can’t contribute to a health savings account.

A Few Additional Heads-Up

If you have traditional retirement accounts, you may run into some required minimum distribution (RMD) issues. Thanks to the 2019 SECURE Act, you don’t have to begin withdrawing RMDs until April 1 of the year after you reach 72, but if you’re still working at that point, your RMD income could bump you into a higher income tax bracket.

You’ll have to pay taxes on your Social Security benefits if your total income is over $25,000 if filing as a single person or $32,000 if you’re married and filing a joint return. Your annual income (including any income from RMDs) will determine the percentage of your Social Security benefits that are subject to income tax.

In addition, higher earners might pay more for Medicare Parts B and D. As mentioned earlier, you could stick with your employer’s healthcare plan to avoid this issue.

Another thing to think about: You can “unretire” after signing up for Social Security, within limits. Changed your mind and want to delay retirement benefits and earn credits instead? If you change your mind within 12 months of taking your benefits, you can request a withdrawal of benefits and take them later when you qualify for a larger benefit. There’s a caveat though — you’ll have to repay all the benefits you and any family members received. If it’s been longer than a year since you started receiving your benefits, you’ll have to wait until your full retirement age to ask for a suspension of benefits.

Should You Work Longer?

When making this decision, I suggest you consider not just your financial situation, but also:

  • Health: Think about your health — and that of your spouse — and your healthcare needs. As mentioned earlier, working later in life can be beneficial to your mental health, but how does it affect your physical health? And how is your spouse’s health? Do they need more help around the house? Do you need to continue working to help pay for medical treatments? Don’t forget to consider the fact that time spent at work is time away from your family.
  • Longevity: Do you come from a long-lived family? Working longer and delaying taking Social Security will both boost your retirement income, which is extra important for those with long life expectancies ahead of them. I suggest you plan to make your money last as long as you do.
  • Your job: Do you like it? Does it make you feel younger?

And of course, take your salary into account. Though ageism in the workplace can be a problem, it may not be an issue for everyone. Some companies may value the experience and wisdom of older workers. In fact, the median earnings of working Americans ages 62 to 65 exceed those of younger workers.

All expressions of opinion reflect the judgment of the author, Ken Moraif, as of the date of publication and are subject to change. Ken Moraif is a controlling owner and investment adviser representative of MMWKM Advisors, LLC, doing business as Retirement Planners of America (RPOA), which is an SEC registered investment adviser. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that RPOA has attained a certain level of skill, training, or ability. Ken Moraif has worked in the financial services industry since 1988 and has been a CERTIFIED FINANCIAL PLANNER™ professional since 1998. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. Readers should not rely on this content as the sole basis for any Social Security, financial planning, investment, or related decisions. A professional adviser should be consulted and/or independent due diligence should be conducted before implementing any of the options directly or indirectly referenced. This article should not be construed as a solicitation to render personalized investment advice. Retirement Planners of America makes no warranty, express or implied, for any decision taken by any party in reliance upon the information discussed. While information presented is believed to be factual and up-to-date, Retirement Planners of America does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

About the Author

Ken Moraif, CFP®

CEO and Senior Adviser, Retirement Planners of America

Ken Moraif, CFP, is CEO and senior adviser at Retirement Planners of America, a Dallas-based wealth management and investment firm with over $4.3 billion in AUM and serving over 8,000 households (as of May 2019). He is also the host of the radio show "Money Matters with Ken Moraif," which has offered listeners retirement, investing and personal finance advice since 1996.

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