Understanding the Full Retirement Age (FRA)
Your Full Retirement Age is the age at which you are entitled to receive 100% of your primary Social Security benefit. The FRA depends on your birth year. For many individuals, including those born between 1943 and 1954, the FRA is indeed 66. For those born in 1960 or later, it has increased to 67. Understanding this specific age is the most critical factor in determining how working will affect your benefits.
Working at Age 66 if it's Your FRA
If your 66th birthday corresponds to your Full Retirement Age, the rules are straightforward and beneficial for those who wish to remain in the workforce. Starting with the month you reach your FRA, the Social Security earnings test no longer applies. This means you can earn any amount from work, whether part-time or full-time, and your Social Security retirement benefits will not be reduced. This provides significant flexibility for seniors who want to supplement their retirement income while continuing their careers.
The Social Security Earnings Test (If 66 is Not Your FRA)
For individuals whose Full Retirement Age is 67, turning 66 means they are still subject to the Social Security earnings test. This test applies to those who collect benefits while working before their FRA. There are two different earnings limits to be aware of:
Earnings Limit for Those Under FRA for the Entire Year
For an individual who turns 66 but is not yet at their FRA, their benefits may be subject to a temporary reduction if their earned income exceeds the annual limit. For example, in 2025, the limit for those under FRA for the entire year is $23,400. For every $2 you earn over this limit, $1 will be deducted from your Social Security benefits. This reduction is temporary, and the withheld funds are not lost permanently.
The Year You Reach Full Retirement Age
In the calendar year that you reach your FRA, a different, higher earnings limit applies. For 2025, that limit is $62,160. The Social Security Administration (SSA) will deduct $1 from your benefits for every $3 you earn over this limit, but this only applies to the months before you reach your FRA. Once you hit your birthday month and every month after, there is no earnings limit.
What Happens to Withheld Benefits?
One of the most important things to remember is that benefits withheld due to the earnings test are not lost. When you reach your Full Retirement Age, the SSA will automatically recalculate your monthly benefit to credit you for the months of benefits they withheld. This leads to a permanently higher monthly payment for the rest of your life, effectively allowing you to 'buy back' some of your benefits. The increase is retroactive to January of the year you earned the money.
The Potential Benefit Increase from Working
Continuing to work, even while collecting benefits, can boost your monthly Social Security check in two ways:
- Higher Earnings Record: Your Social Security benefit is based on your highest 35 years of indexed earnings. If you work in retirement and that year's earnings are higher than one of your previous 35 years, the SSA will replace the lower-earning year with the new, higher one. This automatically recalculates and increases your benefit amount.
- Delayed Retirement Credits: By delaying collecting benefits, even if it's past your FRA, you can accrue delayed retirement credits, which permanently increase your monthly benefit by a certain percentage each year up to age 70.
How Work Affects Your Benefits
| Scenario | Work at Age 66 | Annual Earnings Limit | Benefit Reduction | What Happens After FRA? |
|---|---|---|---|---|
| Your FRA is 66 | Yes, you can work full-time. | None (beginning at age 66) | No reduction. | No change to benefits due to earnings. |
| Your FRA is 67 (Work at 66) | Yes, you can work full-time. | Yes, a limit applies ($23,400 in 2025). | $1 withheld for every $2 earned over limit. | Benefits recalculated for a higher payment. |
| Reach FRA at 67 (Work in that year) | Yes, you can work full-time. | Higher limit applies ($62,160 in 2025) for months before FRA. | $1 withheld for every $3 earned over limit. | Benefits recalculated for a higher payment. |
The Impact of Working on Your Taxes
One important consideration is how additional income from full-time work can affect the taxation of your Social Security benefits. Your benefits may become taxable if your combined income exceeds a certain threshold. Combined income includes your adjusted gross income plus any non-taxable interest and half of your Social Security benefits. It's wise to consult a tax professional to understand your specific situation.
The Bottom Line
The decision of whether to continue working full-time while collecting Social Security at age 66 hinges on your specific Full Retirement Age. If age 66 is your FRA, you have the freedom to earn any amount without consequence to your benefits. If your FRA is later, a temporary earnings test applies, but any withheld benefits are later returned to you in the form of a higher monthly payment. Working later in life may even permanently increase your monthly benefit. Therefore, while the rules vary, the ability to continue working while collecting Social Security is a powerful financial tool for many seniors.
For more information on the earnings test and other rules, refer to the official Social Security Administration guidelines on working while receiving benefits.
Conclusion
Understanding the nuances of the Social Security earnings test and your Full Retirement Age is crucial for planning your retirement. Whether you continue working for financial security or personal fulfillment, the rules are designed to allow flexibility, ensuring that you can continue to contribute to your financial future while drawing on your earned benefits. By planning carefully and understanding the rules, you can make the best decision for your unique circumstances.
