Working and Collecting Benefits Before Your Full Retirement Age
Many people mistakenly believe that 65 is the age for full Social Security retirement benefits, but this is no longer the case for most individuals. The Full Retirement Age (FRA) depends on your birth year, and for anyone born in 1960 or later, it is 67. This is a critical distinction, as working while collecting benefits before your FRA triggers an earnings test that can temporarily reduce your payments.
The Social Security Earnings Test Explained
When you are under your FRA, the Social Security Administration (SSA) places a limit on how much you can earn from work before they start to withhold part of your benefits. In 2025, for those who are under FRA for the entire year, the earnings limit is $23,400. If your earnings exceed this threshold, the SSA will deduct $1 from your benefit payments for every $2 you earn over the limit.
For example, if you earn $35,000 in 2025 at age 65 (assuming an FRA of 67), you are $11,600 over the limit. The SSA would then deduct half of that amount, or $5,800, from your total benefits for the year.
A Special Rule for the Year You Reach FRA
The year you reach your FRA, a different earnings limit applies for the months leading up to your birthday month. For 2025, this limit is $62,160. The deduction rate is also different: $1 is withheld for every $3 you earn above this limit. This rule only applies to earnings in the months before your FRA. Once you reach your FRA month, the earnings test disappears entirely, and you can earn an unlimited amount without affecting your benefits.
How Withheld Benefits are Recalculated
It's a common misconception that any benefits withheld due to the earnings test are permanently lost. This is not the case. The SSA automatically recalculates your benefit amount once you reach your FRA to give you credit for any months they reduced or withheld your benefits. This results in a higher monthly payment for the rest of your life. In essence, the money isn't lost; it's just deferred and paid out over a longer period, resulting in a higher ongoing benefit.
Impact of Working on Your Benefit Amount
Continuing to work, even while collecting benefits, can have a positive long-term effect on your Social Security payments. The SSA calculates your benefit based on your 35 highest-earning years. If you work at 65 and earn a salary that is higher than one of your lower-earning years from earlier in your career, the SSA will automatically substitute the new, higher earnings into the calculation. This can lead to a benefit increase, which the SSA will notify you of and pay retroactively.
Strategic Considerations for Working at 65
- Delaying benefits vs. claiming early: Choosing to delay your Social Security benefits past your FRA (up to age 70) will increase your monthly payment through delayed retirement credits. While you can start benefits at 65 and work, you'll need to weigh the temporary benefit reduction against the immediate income and potential long-term benefit increase from higher earnings. Many find it beneficial to work while collecting, using the combined income stream for a comfortable bridge to full retirement.
- Tax implications: Earning income from full-time work while collecting Social Security can also affect how your benefits are taxed. If your combined income (including half of your Social Security benefits) exceeds a certain threshold, a portion of your benefits may become subject to federal income tax.
- Medicare Enrollment: Regardless of when you start receiving Social Security, you should enroll in Medicare three months before you turn 65 to avoid potential late enrollment penalties. This is a separate process from your Social Security retirement application.
Comparison of Working at 65 vs. FRA
| Feature | Working at Age 65 (Pre-FRA) | Working at FRA (e.g., 67) or Later |
|---|---|---|
| Earnings Test | Yes, applies until your FRA month. | No, you can earn an unlimited amount without reduction. |
| Benefit Reduction | $1 deducted for every $2 earned over the annual limit ($23,400 in 2025). | No reduction to your benefits. |
| Recalculation | Benefits withheld are credited back to your record, increasing future monthly payments. | Not applicable, as no benefits were withheld. |
| Earnings Contribution | New earnings can replace lower-earning years in your top 35, potentially boosting your benefit. | Additional earnings can still boost your benefit if they replace a lower-earning year. |
| Benefit Amount | Your monthly benefit is permanently reduced compared to waiting until FRA. | Your monthly benefit is at its full, unreduced amount, plus potential delayed retirement credits. |
Conclusion
Yes, you can absolutely Can I draw Social Security at 65 and still work full time? However, whether this is the right strategy depends on your financial situation and retirement goals. The key takeaway is to understand that claiming benefits before your Full Retirement Age (FRA) means your work earnings could temporarily reduce your payments due to the earnings test. These reductions are not lost but are added back to your monthly benefit amount once you reach your FRA. The decision hinges on whether you need the immediate income versus the desire to maximize your monthly benefit by delaying. A full understanding of the SSA rules is essential for making an informed choice.
For more detailed information and the latest earnings limits, visit the official Social Security Administration website: Social Security Administration.
