Working in Retirement? Here's How Social Security Cuts Work
Claiming Social Security early while still working can reduce your checks — but that withheld money isn't gone for good.
If you're thinking about collecting Social Security while still punching the clock, there's a catch you should know about. Claiming benefits before you hit your full retirement age (FRA) — which is 67 for most people born after 1960 — while also earning a paycheck can trigger something called the Retirement Earnings Test. In plain English: the government may temporarily hold back some of your benefits if your income crosses certain thresholds.
Here's the part most people miss, though — that withheld money isn't simply gone. Once you reach your full retirement age, the Social Security Administration recalculates your benefit amount to credit you for the months your checks were reduced or withheld. Think of it less like a penalty and more like a delay. Your monthly payment going forward gets a bump to account for what was held back.
Read more Medicare Covers GLP-1 Weight-Loss Drugs Starting July 1 →
The real question, then, is whether claiming early still makes financial sense for your situation. If you need the income now and your job earnings are modest, it might work out fine. But if you're bringing home a solid salary, you could end up seeing most of your Social Security benefit withheld anyway — which somewhat defeats the purpose of claiming early in the first place. Running the numbers before you file is almost always worth the effort.
A few practical moves can help you avoid the worst of the surprise withholdings. Timing when you claim, understanding your FRA, and keeping tabs on annual earnings limits set by the SSA can all play into a smarter strategy. And if you're married, coordinating benefits with your spouse adds another layer of opportunity — or complexity, depending on how you look at it. Either way, going in informed beats a jarring reduction to your monthly deposit.
Continue reading at MarketWatch.com
