It can be tricky to figure out when to retire and when to start to collect benefits, as well as when to stop working. If you work up until age 70, you’ll get delayed retirement credits from the Social Security system, but maybe you don’t want to work until age 70, or maybe your health is preventing you from doing so. Can you work and still collect Social Security?

If you’re at least age 62, you can collect Social Security benefits while you’re still working, but your benefits may be reduced. If you wait until your full retirement age (FRA), you can work and keep all of your benefits, without any penalties no matter how much money you earn. Full retirement age used to be 65 across the board, but now it depends on what year you were born, and for anyone born after 1960 FRA is 67.

If you’re younger than full retirement age during all of 2021, then the Social Security Administration (SSA) will deduct $1 from your benefits for every $2 you earn over $18,960. If you reach FRA sometime during 2021, SSA will deduct $1 from every $3 you earn over $50,520 until you reach FRA.

If you wait until FRA until you retire, you will earn full Social Security benefits. If you wait until age 70, you will be eligible for delayed retirement credits, which will increase your benefit.

What does the SSA count as income?

If you’re employed, wages are counted as income. If you’re self-employed, only self-employed net earnings are counted.

The SSA doesn’t count:

• Other government benefits
• Investment earnings
• Interest
• Pensions
• Annuities
• Capital gains

However, they do count any contributions you make to a pension or a 401(k) if you used wages to make the contribution.

Change in How You Report Earnings

If you work and want to collect Social Security benefits, the SSA wants an accurate record of how much you earn. They will need to see your W-2 forms and any self-employed income you may have. If wages are your only source of income, you don’t need to estimate what you’ll make next year.

However, others will be required to send in an estimate of how much they think they’ll make in the coming year. If your income varied by quite a lot from month to month (for example, you work on commission) or if you have substantial self-employment income, the SSA will send you a form asking you to estimate your income for the next year. They will use this to figure out how much to pay you in benefits, and adjust accordingly once it receives your W-2’s or self employment tax information.

Once you reach full retirement age, there’s no limit on how much you can earn, so you won’t have to send in an estimate.

Collection Considerations

The SSA calls the earliest you can receive benefits the Earliest Eligibility Age, or EEA, and unlike full retirement age, it’s always 62 regardless of what year you were born.

If you want to keep working and collect Social Security benefits, you could work part-time and collect benefits, thereby staying underneath the income limit of $18,960.

If you take retirement benefits early, you’ll see an almost 30% reduction in the amount you would have gotten if you had waited until FRA. The SSA says because you get benefits for a longer period, you get less money per month and it all evens out eventually. Some people mistakenly believe that their benefits will go up after they reach FRA, but that’s not true--you’ll stay at that reduced monthly amount for as long as you receive Social Security.

Spousal Benefits

If you retire at 62, you can file for spousal benefits as long as your spouse has already initiated a claim. This is handy for couples who may be a few years apart in age but want to retire around the same time. You must still be at least 62 and you can collect the higher of your benefit off of your work record or get 50% of your spouse’s benefits if they earned more than you did. You must have been married for at least a year, or if you are divorced, the marriage must have lasted at least ten years. If you were married and divorced multiple times, choose the highest earning spouse.

Just like with claiming your own benefit early, your spousal benefits will be permanently reduced if you start collecting at 62.

Survivor Benefits

Survivors benefits are a little different. You can claim 100% of the deceased benefits as long as you’re full retirement age, or a reduced amount if you collect earlier. You can’t receive both survivors benefits and your own benefits, the SSA will pay you the higher amount but not both.

• As noted above, if you have reached full retirement age, you get 100 percent of the benefit your spouse was (or would have been) collecting.
• If you claim survivor benefits between age 60 (50 if disabled) and your full retirement age, you will receive between 71.5 percent and 99 percent of the deceased’s benefit.
• If you apply on the basis of caring for a child who is under 16 or disabled, you can collect 75 percent of the late spouse’s benefit, regardless of your age.

Bottom Line

It can be very complicated to figure out when to stop working and when to start taking benefits. Talk to a Certified Financial PlannerⓇ to sort it all out and figure out what’s best for you.