Social Security Matters by Rusty Gloor, National Social Security Advisor at the AMAC Foundation, the non-profit arm of the Association of Mature American Citizens
Dear Rusty: I am fast approaching 65 (in August) and plan to continue working full time. I would like to know the implications of that, and about drawing Social Security. Same question for my husband who is past his full retirement age (he will be 67 this year) and he continues to work full time. Signed: Still Working
Dear Still Working: Married couples should always coordinate their retirement strategy, and you’re very smart to do so. Born in 1958, your full retirement age (FRA) for Social Security purposes is 66 years and 8 months. Your FRA is the point at which your earnings from work no longer affect your Social Security benefits, but if you claim at age 65 and continue to work full time, you will be limited to how much you can earn before they take away some (or perhaps all) of your benefits. Here’s what will happen if you claim Social Security (SS) to start in August when you are 65:
- Your SS retirement benefit will be permanently reduced by 11% (you’ll get 89% of your FRA entitlement). Your monthly amount will only change thereafter due to Cost of Living Adjustments (COLA).
- If you start your benefits in August you will be subject to an earnings limit – either a monthly limit of $1,770 for the remaining months of the year or the 2023 annual limit of $21,240. If the monthly limit is exceeded you aren’t entitled to benefits for that month, or if the annual limit is exceeded they will take back benefits equal to $1 for every $2 over the annual limit. Social Security will use whichever method yields the smallest penalty.
- Beginning in 2024, you will be subject only to Social Security’s annual earnings limit, which will be something more than the 2023 annual limit of $21,240. If you exceed the 2024 (or 2025) annual limit, Social Security will take away $1 in benefits for every $2 you are over the limit (half of what you exceed the limit by). The annual limit will be in effect until you reach your full retirement age of 66 years and 8 months in April 2026.
Since your husband has already reached his FRA, working full time will not negatively affect his monthly Social Security benefits if he chooses to claim his SS benefits now. However, if he hasn’t yet claimed your husband is already earning Delayed Retirement Credits (DRCs) which will increase his benefit when he later claims. DRCs are earned monthly (.667% per month; 8% per year) and can be earned up to age 70 when maximum SS benefit is attained. For your husband, his age 70 benefit would be 29% more than he was entitled to at his FRA. Whether it is wise to wait longer to claim depends on life expectancy, but break even age is about 83 for those who wait until 70 to claim (vs. claiming at FRA). FYI, average life expectancy for a man your husband’s current age is about 84; for you about 87.
Since you are both still working full time, be aware that – depending on your combined income from all sources – your Social Security benefits will become part of your taxable income. As a married couple both working full time, your combined income will likely be over the $44,000 threshold after which income tax will be levied on up to 85% of your Social Security benefits received during the tax year (using your normal IRS tax rate). I suggest you consider the income tax implications of claiming Social Security while you are still working full time.
You did not ask about Medicare, but if you (and your husband) now have “creditable” healthcare coverage from your employer (“creditable” is a group plan with at least 20 participants) you can defer enrolling in Medicare Part B until your employer healthcare coverage ends, thus avoiding the Medicare Part B premium while you are working.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.
