The new retirement twist: Why millions are working while collecting Social Security

Social Security benefits: Claiming Social Security while still working has quietly become a normal part of retirement life as a recent report from the Center for Retirement Research at Boston College shows that two in five people now combine work and benefits for at least some period of time, as per a report.

Why more Americans are working while collecting Social Security

Sharon Smith is one of them. She began collecting her Social Security benefit at 67 even though she wasn’t retiring, as per a Yahoo Finance report. Smith, an executive coach and business consultant who splits her time between Naples, Fla., and Boston, had reached full retirement age and was ready for a shift.

She said, “I stepped out of a high-pressure management job, and I needed a break to focus on my health and morph into a new career,” as quoted by Yahoo Finance. Her monthly Social Security check helped make that possible. She said that, “My husband and I needed that money as I built up my coaching business, and I'm glad we've had it,” adding, "I'm able to not feel like I have to do things I don't want to do, or to take a job or not," as quoted by Yahoo Finance.


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Why older adults rely on both earnings and Social Security benefits

Social Security was originally designed for those no longer working, but many households over age 65 now rely on both job earnings and benefits. Siyan Liu, co-author of the study, pointed out that even though labor force participation drops sharply after 62, job earnings still make up more than a fifth of income for older households, as per the report.

The groups of workers who claim Social Security early

According to Liu, people who work after claiming benefits fall into two main groups. More than two-thirds are lower earners who claim early, “They typically work part time and need to use Social Security to supplement earnings,” quoted Yahoo Finance.

The rest are higher earners who claim around full retirement age and often keep working full time, as Liu explained, “Their combined income typically exceeds pre-claiming levels, suggesting some could postpone claiming until 70 to maximize monthly benefits,” as quoted in the report.

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How claiming age affects your Social Security benefits

People can start Social Security at 62, but doing so can reduce their benefit by as much as 30% from what they would receive at full retirement age, which is 67 for anyone born in 1960 or later. Delaying benefits up to age 70 adds roughly an 8% increase for each year waited.

What happens if you work and claim Social Security before reaching full retirement age

Working while receiving Social Security before full retirement age can trigger temporary withholding if earnings pass a certain threshold, roughly $23,000. That limit is higher in the year someone reaches full retirement age, and once they hit that month, the earnings test disappears entirely. Withheld amounts are later factored into a higher monthly benefit.

Why some retirees still need both a paycheck and Social Security

Richard Johnson, AARP's vice president of financial security, highlighted that, "This helps them make ends meet. The fact that many people need both a paycheck and a Social Security check to pay their bills underscores the danger of any efforts to cut Social Security benefits. Many retirees are barely hanging on as it is," as quoted by Yahoo Finance.

FAQs

Is it common to work and collect Social Security at the same time?
Yes, a recent report shows that two in five people do both for at least some time.

Why do some people start benefits even if they don’t retire?
Some people need the income to support a career transition or cover living expenses.