Social Security benefits are a crucial part of retirement planning for many Americans. The Social Security Administration (SSA) provides financial support to retirees, people with disabilities, and their dependents. The amount of benefits one receives depends on several factors, such as retirement age and work history.
For example, retiring at age 62 in 2025 will result in a 30% reduction in monthly benefits compared to the full amount available at age 67. The SSA categorizes beneficiaries into three main groups: retirement benefits, survivor benefits, and disability benefits. Recent reports suggest that the average monthly payment for retired workers will surpass $2,000 for the first time in the program’s history.
Working while receiving Social Security benefits is possible, but it comes with both advantages and drawbacks. Earning income in retirement can boost future benefit payments by replacing zero-income years in one’s work history. However, earning too much before reaching full retirement age may lead to a temporary withholding of benefits.
The SSA applies an earnings test for those who work while collecting benefits before reaching full retirement age. In 2025, $1 in Social Security will be lost for every $2 of income above $23,400.
Social Security retirement planning strategies
For those reaching full retirement age within the year, $1 will be withheld for every $3 of income exceeding $62,160. Returning to work after retirement, or “unretiring,” can impact Social Security benefits depending on age and current benefit status. Those younger than full retirement age may have a portion of their benefits withheld based on their earnings.
In some cases, individuals may need to pay back benefits they’ve already received. At full retirement age, people can work without affecting their benefits. A special rule applies for those who retire and then “unretire” mid-year, allowing them to receive full benefits for months they are considered fully retired.
Other financial aspects to consider when “unretiring” include Medicare coverage, taxes, and retirement savings. Adjusting Social Security benefits can lead to changes in Medicare premiums and tax brackets. Drawing from retirement savings while earning income may also affect one’s tax situation.
Navigating the complexities of Social Security benefits can be challenging. It is advisable to consult with financial advisors and utilize the tools provided by the SSA to make informed decisions about retirement planning and working while receiving benefits.
