Retirement Planning

What if I keep working? How will it impact my Social Security Benefits?

Dec 13, 2023

Clients with an understanding of the correlation between earnings and benefits often inquire their benefit will be affected if they keep working. Specifically, they question whether claiming their benefit locks the amount (except for annual COLAs) or if their earnings record continues to be updated, potentially resulting in a benefit increase

In essence, as long as clients work and pay FICA taxes, their earnings will be recorded, leading to a refiguration of their Primary Insurance Amount (PIA). If the latest earnings cause a prior year of lower earnings to drop off the 35-year earnings record used to calculate the PIA, the benefit will increase. If not, there will be no change in the benefit amount. This process continues even after benefits have commenced and usually occurs in October, retroactive to January.

Consider Steve, a maximum earner set to turn 62 in 2024. His PIA, officially calculated in 2024 based on the highest 35 years of earnings through 2023, considers only the 35 highest earnings out of his 40-year record. His Average Indexed Monthly Earnings (AIME) will be $13,100, resulting in a PIA of $3,849, which he would receive if he claims his benefit at his Full Retirement Age (FRA) of 67, excluding COLAs or future earnings.

If Steve works in 2024, these earnings will be added to his record, which will have 41 years of earnings. However, only the highest 35 years will count. If he earns at least $168,600 (the maximum wage base for 2024), this will replace one of the earlier years ($151,181), causing an increase in his benefit. Continuing to work until age 70, assuming a 3% annual rise in the wage base, will result in progressively replacing lower earnings with higher earnings. By age 70, his new AIME will be $14,865, and his new PIA will be $4,113. This projection excludes COLAs or delayed credits and represents the PIA used to calculate his benefit and any auxiliary benefits paid off his record.

Therefore, by working an additional eight years, Steve can add $264 to his monthly benefit amount, or about $33 per year. If COLAs average 2% during this period, his PIA at 70 will be $4,889. Incorporating three years of 8% annual delayed credits on top of this will result in an age-70 benefit of $6,062. If he continues working at maximum earnings post-claiming, his earnings record will keep getting updated, allowing his benefit to rise by approximately $30 per year, in addition to annual COLAs.

Should Steve choose to work but at a lower pay scale, it will not cause a reduction in his PIA. Once the PIA is calculated at age 62, it cannot decrease. However, the officially calculated PIA at 62 does not appear on the statement; what Steve sees is an estimate of his future benefit based on the PIA, adjusted for future earnings. Therefore, although Steve’s PIA calculates to $3,849 at age 62, his age-70 benefit estimate presumes a PIA of $4,113, accounting for presumed earnings, plus the three years of 8% annual delayed credits. (SSA estimates exclude COLAs.) While we say Steve can increase his PIA by continuing to work, considering the numbers he sees, a more accurate depiction is that he’ll reduce his PIA if he does NOT work until claiming age.

Certain individuals argue that collecting FICA taxes from those over 70 is unfair, given the common tendency to decelerate in activity during this life stage. When individuals over 70 opt to work, it is often on a part-time basis, resulting in no replacement of earnings on their 35-year record. Consequently, their return on the “investment” made through FICA taxes becomes zero. Although there have been suggestions to cease collecting FICA taxes from those over 70, these proposals haven’t gained momentum, especially when the current focus is on augmenting funds for the Social Security trust fund rather than reducing them. Nevertheless, it’s crucial not to lose sight of the broader perspective: earnings, regardless of their magnitude, play a pivotal role in enhancing a client’s financial well-being. The impact on Social Security constitutes just one facet of this comprehensive financial landscape.

If you require assistance in retirement planning, our team of experts are ready to lend a hand. We offer a unique and proprietary service, The Smart Social Security Benefits Maximizer/Retirement Healthcare Expenses Estimator ℠, which will provide you with a thorough analysis and comprehensive strategies to help you maximize the Social Security benefits you receive.

Should you wish to explore our services and discover how we can assist you, then click here to schedule a complimentary 15-minute initial consultation.


The information contained in this post is for general use and educational purposes only.  However, we do offer specific services to our clients to help them implement the strategies mentioned above.  For specific information and to determine if these services may be a good fit for you, please select any of the services listed below. 

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