How Returning to Work Might Influence Your Future Social Security Benefits

Thinking about going back to work while collecting Social Security? You might see your benefits increase.

At a Glance

Returning to work can increase future benefits by recalculating Social Security payouts.
Benefits are based on the highest 35 years of earnings, making it worthwhile to replace zero-earning years.
Delaying benefits until age 70 can increase payouts by 7-8% annually after full retirement age.
Over 50% of older adults rely on Social Security for the majority of their income.
Average Social Security benefits are often insufficient to cover rising living costs.

Impact of Returning to Work on Social Security Benefits

Returning to work after beginning Social Security benefits can lead to recalculated, potentially higher payouts. The Social Security Administration (SSA) determines benefits using your highest 35 years of earnings. If you return to work and earn more than before, it can replace lower earnings in those 35 years, directly boosting monthly benefits and aligning payouts more accurately with your lifetime earnings.

Extra work years can especially benefit those with short or low-earnings histories. According to Keith Speights, “The ‘secret’ is that the Social Security Administration (SSA) will recalculate your benefit amount if you continue working.”

Strategies for Maximizing Benefits

Social Security provides the primary income source for many over 65, especially as expenses often exceed average benefits. Delaying Social Security claiming until age 70 can increase benefits by about 7-8% each year past full retirement age, maximizing lifetime returns. Benefit amounts increase because retirees replace zero or low-earning years with higher-earning ones. Checking Social Security statements yearly helps ensure accuracy, avoiding calculation errors.

“Social Security is the major source of income for most people age 65 and over,” explains Jennifer Teague, emphasizing its role in retirement.

The Earnings Test and Retirement Decisions

Working while collecting Social Security under the full retirement age is possible, though earnings limits can temporarily reduce benefits. However, withheld benefits are reimbursed upon reaching retirement age. Factor in taxes, as Social Security benefits face taxation, which requires planning to minimize taxable income.

Married couples should consider coordinated claiming, maximizing potential spousal and survivor benefits. Additionally, divorced individuals can claim spousal benefits if married for at least 10 years. Such strategies ensure decisions are informed and align with financial goals, potentially increasing retirement security.