Yes, you can collect Social Security benefits and work in retirement at the same time. "But if you're working and collecting benefits before you've reached full retirement age — which is between ages 66 and 67, depending on the year of your birth — your monthly benefits may be subject to a reduction if your income exceeds a prescribed limit," says Ben Storey, director, Retirement Research & Insights at Bank of America.
However, when you reach full retirement age, your Social Security benefit will be recalculated to give you credit for those months when your benefits were reduced due to excess earnings. After you reach full retirement age, your benefits also will no longer be subject to any reduction while you're employed, and there's no limit on how much you can earn.
The Social Security Administration uses a formula based on an annual earnings limit and your age to calculate the Social Security benefits you will receive while you're still working. While it's best to discuss your situation with an advisor or accountant, the Social Security website includes a
Social Security Administration retirement earnings test calculator for you to model how your earnings could affect your benefit payments.
Will my Social Security retirement benefits be taxed differently if I work?
Working while collecting Social Security can affect your federal taxable income. Part of your Social Security retirement benefits may be subject to federal taxes if an amount often referred to as your combined income exceeds a specified base amount. Your combined income is determined by adding up your adjusted gross income, any tax-exempt interest you may have earned (plus certain other items), and 50% of your Social Security benefits. There are strategies that can
help you minimize taxes on your Social Security benefits, although these too can change based on your age.
Calculating your combined income
If you're working and collecting benefits before you've reached full retirement age, your monthly benefits may be subject to a reduction if your income exceeds a prescribed limit.
— Ben Storey,
director, Retirement Research & Insights at Bank of America
This material should be regarded as educational information on Social Security considerations and is not intended to provide specific advice. If you have questions regarding your particular situation, you should contact the Social Security Administration and/or your legal advisors.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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