Working while you get Social Security: what you need to know

In this regular column, Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and the co-author of the updated edition of The New York Times bestseller How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security, answers your most pressing questions about Medicare and Social Security.

What happens if I claim Social Security while I’m still working?

Margaret, Fla.: I was born in 1955. Can I apply for Social Security benefits at 62 and continue earning a salary?

Phil Moeller: Yes, a person who claims Social Security at 62 can continue to work.

However, under the terms of Social Security’s earnings test, if your wages are high enough, your Social Security benefits would be reduced or possibly eliminated entirely, for the time being. 

Here is how the earnings test works. If you file for benefits between now and the year before your full retirement age (66, in your case), the agency will withhold $1 in benefits for every $2 of earnings in excess of the lower exempt amount.

During the year in which you turn 66, but before your birthday, it will withhold $1 in benefits for every $3 of earnings in excess of the higher exempt amount. Earnings in or after the month you turn 66 do not count toward the earnings test.

Here’s a tool from Social Security that will let you plug in your variables and see how the earnings test would affect your benefits.

That earnings test no longer applies, however, once you are past your full retirement age. At that point, the reductions will be restored to you, in the form of higher lifetime benefits.

If I keep working past Social Security retirement age, will my benefits increase?

Allan, Nev.: I took my Social Security at 62. I continued to work for 12 more years before retiring at 74. Am I eligible for any increase in my monthly benefit because of those 12 additional years of earning and payroll taxes?

Phil Moeller: Social Security bases your benefits on your highest 35 years of wage earnings. If any of these 12 years counts as a new top-35 year, you should get a bump up in benefits.

However, the effect of any single year’s higher earnings will be modest. The agency uses a complex measure of past wage inflation to weight each year’s wages. This means that making more money in a recent year won’t necessarily cause that year to become a new top-35 year.

You can get an idea of your official earnings record by opening an online My Social Security account. If you think your benefits should have been increased, call the agency.

Can I work and still collect my late husbands’ Social Security benefits?

Melanie: My husband died at age 52 while still employed. I am now 63 and am employed full time.

I have not remarried. I am not planning on retiring until at least age 66. Am I able to work and still collect my late husband’s benefits as his widow? I make above the amount of the Social Security earnings test.

Phil Moeller: This is complicated stuff. As you know, the earnings test applies to people who file for benefits before reaching their full retirement age, which is 66 for you.

If you apply for a widow’s survivor benefit before reaching your full retirement age, the earnings test will be in effect. Its exact impact on your benefits depends on how much wage income you earn and on how big your benefit would be.

The restoration of benefits lost to the earnings test is associated with the specific benefit you’re filing for. In your case, it’s a survivor’s benefit. So, any future restorations will be to your survivor’s benefit.

Your note says you are still working and don’t plan to retire for at least a few years. This makes me wonder whether your own retirement benefits eventually will be higher than your survivor benefits.

If so, you would be in effect switching to your retirement benefit at a later date. Doing so would mean that restoration of your survivor benefits would not occur, because you no longer would be claiming that benefit.

One possibility I’d suggest you consider is to wait until you turn 66 to file for the survivor benefit. This will avoid the earnings test and provide you your maximum survivor benefit.

And if you can afford it, delay filing for your own retirement until age 70. This will provide you four years of maximum survivor benefits and allow your retirement benefit to grow by 32% between age 66 and 70 (8% a year).

I understand if you can’t afford to pursue this strategy, but if your retirement benefit is going to represent your largest Social Security payment, maximizing it for the rest of your life makes a lot of sense.

A version of these questions previously appeared on the PBS NewsHour Making Sen$e website.