Many people find themselves returning to the workforce after starting Social Security. This can be due to various reasons, such as a change in financial circumstances, a desire to stay active and engaged, or simply a love for their work. While returning to work after retirement is certainly possible, it’s crucial to understand how it affects your Social Security benefits.
Key Considerations for Returning to Work After Starting Social Security
Here are the key things to keep in mind if you’re considering going back to work after starting Social Security:
1. Age and Earnings Limit:
- Full Retirement Age: If you are younger than your full retirement age, your Social Security benefits may be withheld or reduced if your earnings exceed the annual earnings limit. For 2024, this limit is $22,320.
- Full Retirement Age or Older: Once you reach full retirement age (66 for people born between 1943 and 1954, gradually increasing to 67 for those born in 1960 or later), your benefits won’t be affected by your earnings.
2. Repayment of Benefits:
- Under 70: If you are under 70 and decide to return to work within 12 months of applying for Social Security, you can withdraw your application. However, you’ll need to repay any benefits you’ve already received.
3. Special Rule for Mid-Year Retirement:
- Earnings in Year of Retirement: If you retire mid-year and start working again in the same year, you may still receive full benefits for the months you were considered fully retired, regardless of your total earnings for that year.
4. Social Security’s Annual Earnings Test:
- Earnings Limit: If you’re below normal retirement age and not currently working, the earnings test helps determine if your benefits will be withheld if you return to the workforce.
- Exempt Amounts: Two different exempt amounts apply: a lower amount for years before reaching normal retirement age ($22,320 in 2024) and a higher amount for the year you reach it ($59,520 in 2024).
- Benefits Withheld: Benefits are withheld if your earnings exceed the exempt amount.
- Increased Future Benefits: Monthly benefits will be increased to account for the time in which your benefits were withheld.
Additional Considerations for Returning to Work
1. Medicare Coverage:
- Part B Coverage: If you’re receiving Part B coverage and withdraw your Social Security application, you’ll be billed for future premiums. Failure to pay on time may result in coverage removal.
- Part B Premiums: Individuals earning above $103,000 pay more for Part B premiums than the standard amount in 2024.
2. Taxes:
- Taxable Social Security Benefits: Up to 85% of your Social Security benefits may be taxable depending on your total income.
- Consult a Tax Professional: Consider consulting a tax professional to avoid penalties for inaccurate reporting or withholding.
3. 401(k)s:
- Delaying Required Minimum Distributions: Returning to work may allow you to delay required minimum distributions (RMDs) on your 401(k)s, allowing for continued growth.
- Rollover Old 401(k)s or IRAs: Rolling over old retirement accounts into your new plan can also help delay RMDs and maximize growth.
4. Pensions:
- Impact on Pension Benefits: Returning to work may impact your current or future pension benefits. It’s important to review the specific details of your pension plan.
Returning to work after starting Social Security is a possibility for many individuals. However, it’s crucial to understand how it affects your benefits and other financial aspects like taxes, Medicare, and retirement accounts. Carefully consider these factors and consult with financial and tax professionals to make informed decisions about returning to work and maximizing your financial well-being.
Frequently Asked Questions
1. Will I lose my Social Security benefits if I go back to work?
No, you won’t lose your Social Security benefits if you go back to work. However, your benefits may be reduced or withheld if you are younger than full retirement age and earn above the annual earnings limit.
2. Can I get my Social Security benefits back if they were withheld?
Yes, you can get your Social Security benefits back if they were withheld. Your monthly benefits will be increased to account for the time in which your benefits were withheld.
3. How will returning to work affect my taxes?
Up to 85% of your Social Security benefits may be taxable depending on your total income. It’s recommended to consult a tax professional to avoid penalties for inaccurate reporting or withholding.
4. How will returning to work affect my Medicare coverage?
If you’re receiving Part B coverage and withdraw your Social Security application, you’ll be billed for future premiums. Failure to pay on time may result in coverage removal.
5. How will returning to work affect my 401(k)s and pensions?
Returning to work may allow you to delay required minimum distributions (RMDs) on your 401(k)s and maximize growth. It’s also important to review how returning to work may impact your pension benefits.
How Much Can I Earn and Still Get Benefits?
In our eyes, you are retired when you start getting Social Security retirement benefits. It is possible to work and receive Social Security retirement or survivors benefits simultaneously. There is a cap on the amount you can make though and still be eligible for all benefits.
We reserve the right to lower your benefit amount if you are under full retirement age and earn more than the annual earnings cap.
For every $2 you earn over the annual cap, we deduct $1 from your benefit payments if you are not yet at full retirement age for the entire year. For 2024, that limit is $22,320.
We deduct $1 from your benefits in the year you reach full retirement age for every $3 you earn over a certain threshold. In 2024, this limit on your earnings is $59,520. Your earnings are only taken into account until the month before you become fully retired; your total earnings for the year are not taken into account.
We have a special rule that applies to earnings for one year if your earnings will exceed the annual limit and you will receive retirement benefits for a portion of the year. Regardless of your yearly earnings, the special rule allows us to pay your full Social Security benefit for any full month that we deem you retired.
When applying the annual earnings test (AET) for retirement or survivors benefits, we use your full retirement age if you receive survivors benefits. For AET purposes, we use your full retirement age for retirement benefits, even though the full retirement age for survivors benefits might be earlier. Even if the beneficiary is not eligible for retirement benefits, this rule still applies.
For additional information, see our publication “How Work Affects Your Benefits.”
When you reach full retirement age:
- No matter how much you earn, your earnings will no longer reduce your benefits starting in the month you reach full retirement age.
- In order to give you credit for the months in which we reduced or withheld benefits because of your excess earnings, we will recalculate the amount of your benefits.
Working while Receiving Social Security
FAQ
Do I have to notify Social Security if I start working again?
Can I stop collecting Social Security and go back to work?
What happens if you retire and then go back to work?
Will my Social Security benefits increase if I go back to work?
Will going back to work affect my Social Security benefits?
However, be sure you understand how that decision will impact your Social Security benefits. The answer will largely depend on your age, but heading back to work could result in benefits being withheld for a period of time, or having to repay benefits you’ve already received.
What happens if I work and get Social Security retirement benefits?
You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit.
Can a return to work boost Social Security benefits?
Also, keep in mind that Social Security benefits are based on your highest 35 years of income, so returning to work in retirement could actually boost your Social Security benefits by replacing or filling in for years when you had little or no earnings.
Can I claim social security if I go back to work?
Have you claimed Social Security and then gone back to work? You may face the ‘earnings test’ If you’ve claimed your Social Security retirement benefits and continue working or return to work before you reach your full retirement age (FRA), you need to be aware of the earnings test.