Social Security was created in 1935 to pay workers over age 65 a continuing income after they retired. The idea is that people pay into Social Security through taxes and in return receive benefits when you need them most. Since then, Social Security retirement benefits have been a cornerstone of ensuring that older Americans have access to funds they need.
Retirement Age and Social Security
Social Security isn’t a guaranteed benefit. You have to meet certain eligibility requirements in order to claim Social Security benefits. You’re eligible if you have earned 40 credits. Typically that means:
- You’re 62 or older
- You’ve worked and paid Social Security taxes for 10 years or more. For most employees, Social Security is automatically withdrawn from paychecks, but some state and town government positions don’t and so don’t contribute to your eligibility. You can create or check your Social Security account to see where you stand.
You can also qualify based on a current or former spouse’s work. You can check your eligibility here.
The amount of your Social Security benefit is based on your highest 35 years of earnings and the age at which you start receiving your benefits.
If You Begin Taking Social Security Before Full Retirement Age
You can start taking Social Security benefits at age 62. However, taking benefits before you reach your full retirement age (see chart below) will permanently reduce your monthly benefit by a small percent for each month you are early. It’s important to note that this reduction impacts every Social Security payment you will receive, even after you reach full retirement age.
If you were
Your full retirement
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 and later
If you were born on January 1 of any year, refer to the previous year to determine your full retirement age.
If You Wait to Take Social Security Until At or After Full Retirement Age
If you retire at full retirement age, you'll receive your full benefit – calculated based on 35 years of your highest earnings and age. Working after full retirement age can help increase your Social Security benefits if you don’t have 35 years of work (replacing 0’s in the calculation) or if you’re earning more now than you have at any other point during your 35 years of work.
If you delay receiving benefits, you'll get a bigger Social Security check every month. How much bigger depends on what year you reach full retirement age and how long you wait to start collecting benefits. If you were born in 1943 or later, you'll receive 2/3 of 1% for each month that you delay collecting retirement benefits (8% more per year), up until age 70. So, for example, if your full retirement age is 66 and you delay collecting benefits for 4 years, your benefit at age 70 will be 32% higher than at age 66.
You can estimate your retirement benefit based on your actual earnings record using the Retirement Estimator calculator on the Social Security website. You can create different scenarios based that will show how different earnings amounts and retirement ages will affect the benefit you receive.
How Working Affects Your Social Security Benefits
With longer life expectancies and ongoing financial pressures, some people are choosing to work past their retirement age. That can impact what you receive from Social Security – how work affects your benefits is based on your age and income.
Social Security Income Limit
If you’re taking Social Security benefits before full retirement age, you are subject to the retirement earnings test (RET). This is essentially an annual earnings limit. Your Social Security benefits will be withheld when you make over that earnings limit. In 2023, that earnings limit is $21,240; for every $2 you make over that limit, your benefit will be reduced by $1. If you’re reaching your full retirement age in 2023, that limit changes to a $1 deduction from benefits for every $3 earned over $56,520 until the month you turn your full retirement age.
When you reach your full retirement age, you are no longer subject to the income limit. The money that has been withheld while you continued to work will be added to your monthly income once you reach full retirement age. Over a typical lifespan, someone impacted by the retirement earnings test recoups most or all of the benefits withheld while they were working.
Pros of Working While Collecting SSI
Working while collecting Social Security benefits is beneficial for the obvious reason; the work that you’re doing supplements the income you receive from Social Security. From a non-financial perspective, it can also be rewarding and invigorating.
If you haven’t reached full retirement age but are taking Social Security benefits, earning more than the earnings limit can have positive impacts on the monthly amounts you receive after you reach your full retirement age. This can help offset the decrease in benefits that comes from beginning to withdraw benefits before your full retirement age.
Cons of Working While Collecting SSI
Working and collecting Social Security before you’ve reached full retirement age puts you at risk for reduced payments due to the retirement earnings test. If you have reached full retirement age, that is no longer a consideration.
If you have income plus Social Security payments, you may pay more in income taxes than if you just had income from a job.
When Should You Start Collecting Social Security?
Maximizing your Social Security benefits is a delicate dance. You want to ensure that you have the funds you need to support your lifestyle, but because benefits max out at age 70 and you receive more each month you wait past full retirement age, you want to wait as close as you can to age 70 to maximize your monthly payments.
Connect with a Farm Bureau agent or financial advisor with your Social Security questions. They can look at your specific situation and do a cost-benefit analysis to help you determine the best move for you.