Understanding Full Retirement Age (FRA)
Your full retirement age (FRA) is the age when you are eligible to receive your full, unreduced Social Security retirement benefits. This age varies depending on the year you were born. For anyone born in 1960 or later, your FRA is 67. The Social Security Administration (SSA) defines this age and outlines all the rules surrounding how your benefits are calculated and when you can start receiving them. The flexibility that comes with reaching this age is a game-changer for many retirees who wish to remain in the workforce.
The Earnings Test: How It Changes at FRA
The "retirement earnings test" (RET) is a critical factor for anyone considering working while collecting benefits. The rules of this test are entirely different before and after you reach your FRA. Before your FRA, if your earnings exceed a certain limit, a portion of your Social Security benefits will be temporarily withheld. This rule is often a significant concern for those who retire earlier but want to continue working, even part-time.
However, the month you reach your FRA, the earnings test ceases to apply. The SSA removes all limits on how much you can earn, and your benefits will not be reduced, no matter how much you make from a job or self-employment. This change is a primary advantage of waiting until FRA to claim your benefits.
How Working Past FRA Can Increase Your Benefits
For those who are able to, continuing to work past your FRA can actually increase your monthly Social Security benefit in several ways. The SSA uses your 35 highest-earning years to calculate your benefit amount. If you continue to work and earn a higher salary than one of your earlier, lower-earning years, the SSA will automatically recalculate your benefit to include the new, higher income. This recalculation can result in a permanent boost to your monthly check. For example, if you had a year with low or no income early in your career, working longer can replace that low-earning year with a higher one, potentially increasing your average indexed monthly earnings (AIME).
Additionally, delaying your claim for benefits past your FRA also earns you delayed retirement credits. These credits further increase your monthly benefit for every month you wait to file, up until age 70. Combining continued work with delayed benefits can significantly maximize your retirement income.
Taxation of Social Security Benefits
While working at or past your FRA eliminates the earnings test, it's important to remember that your income can still affect the taxation of your Social Security benefits. If your combined income (including half of your Social Security benefits, plus all your other taxable income) exceeds a certain threshold, a portion of your benefits may be subject to federal income tax. This threshold is based on your tax-filing status.
- Single filers: If your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If it's over $34,000, up to 85% may be taxable.
- Joint filers: If your combined income is between $32,000 and $44,000, up to 50% of your benefits may be taxable. If it's over $44,000, up to 85% may be taxable.
These taxation rules are distinct from the earnings test and apply to retirees of all ages. Therefore, while you won't lose benefits for working after FRA, you may see a higher tax bill.
Comparison: Working Before vs. After Full Retirement Age
| Feature | Working Before FRA | Working At or After FRA |
|---|---|---|
| Earnings Limit | Yes, strict annual limits apply. Benefits are withheld if earnings exceed the limit. | No limit on earnings. No benefits are withheld regardless of income. |
| Benefit Recalculation | Withheld benefits are credited back as a higher monthly payment once FRA is reached. | Continued work can replace lower-earning years, potentially increasing the benefit amount annually. |
| Delayed Retirement Credits | Not applicable; delaying is what earns these credits. | Can be earned for each month benefits are delayed past FRA up to age 70, resulting in a higher monthly check. |
| Taxation of Benefits | Potentially taxable depending on combined income, similar to after FRA. | Potentially taxable depending on combined income, similar to before FRA. |
Making Your Decision
Deciding when to claim Social Security while still working involves careful consideration of several factors. If you need the income immediately, claiming early may be the right choice, but you must be mindful of the earnings limit and the potential for a permanently reduced benefit. For those who don’t need the income right away, waiting until FRA or even delaying further to age 70 offers a significant financial advantage. By eliminating the earnings test, continuing to work at or after FRA provides the flexibility to supplement your retirement income without penalty. Moreover, every year you continue to work and earn a high salary, you're building a stronger earnings record, which can lead to a higher benefit down the road.
Consider your financial needs, health status, life expectancy, and spousal benefits before making a final decision. Consulting a financial advisor who specializes in retirement planning can provide personalized guidance tailored to your unique situation. For more detailed information on your specific retirement benefits and planning tools, visit the official Social Security Administration website.
Conclusion
In summary, the answer is a resounding yes: you absolutely can collect Social Security while working at your full retirement age. At this milestone, the Social Security Administration's strict earnings limit is lifted, allowing you to earn as much as you like without any reduction in your benefits. Not only are your benefits safe, but continuing to work can potentially increase your monthly payment if your recent earnings are among your highest 35 years. The taxation of benefits remains a consideration, but the freedom to work and earn without penalty at your full retirement age is a major benefit for many retirees.
