Understanding Full Retirement Age (FRA)
While the question "How many hours can you work when you retire at 66?" seems straightforward, the answer depends on when you were born. The Social Security Administration (SSA) defines your full retirement age based on your birth year. For those born between 1943 and 1954, the FRA is 66, but this age increases incrementally for those born later, reaching 67 for those born in 1960 or after. This means that some individuals retiring at 66 will have reached their FRA, while others may still be subject to earnings limitations.
The 'No Earnings Limit' Rule
If you have already reached your FRA by the time you turn 66, you can work as many hours as you want without affecting your Social Security benefits. This is because the Social Security earnings test no longer applies. For example, if you were born in 1958, your FRA is 66 and 8 months, so the unlimited earnings rule would not apply until that specific month.
Social Security Earnings Limits Before FRA
If you are 66 but have not yet reached your FRA, your work income is subject to the Social Security earnings test. The specific earnings limit depends on whether you are under FRA for the entire year or reach it during the year.
Earnings Test Rules for 2025
- If you are under FRA for the entire year: The annual earnings limit is $23,400. For every $2 you earn over this limit, the SSA will withhold $1 from your benefits.
- In the year you reach FRA: A higher annual earnings limit of $62,160 applies, but only for the months before your birthday month. For every $3 you earn over this limit, $1 will be withheld. Starting with your birthday month, the earnings limit is eliminated.
The Recalculation Advantage
Benefits withheld due to the earnings test are not permanently lost. Upon reaching your FRA, the SSA will recalculate your monthly benefit amount to account for the withheld benefits, potentially leading to higher future payments.
Factors Beyond Social Security to Consider
Working in retirement can impact other financial areas:
- Pension Plans: Some pension plans may have restrictions on returning to work, particularly for the same employer.
- Medicare Premiums (IRMAA): Higher income from working could lead to increased Medicare Part B and D premiums through the Income-Related Monthly Adjustment Amount (IRMAA).
- Taxable Income: Wages from working are taxable and can increase the portion of your Social Security benefits subject to federal taxes.
Comparing Earnings Limits: Pre-FRA vs. At FRA
| Feature | Before Reaching FRA | In the Year You Reach FRA | After Reaching FRA |
|---|---|---|---|
| Earnings Limit (2025) | $23,400 | $62,160 (before birthday month) | No Limit |
| Benefit Reduction | $1 withheld for every $2 over the limit | $1 withheld for every $3 over the limit (before birthday month) | No Reduction |
| Recalculation at FRA | Yes, benefits adjusted for higher payments | Yes, benefits adjusted for higher payments | Not Applicable |
| Hours Constraint | Indirectly limited by earnings cap | Indirectly limited before FRA month | No Constraint |
Practical Steps for Working at 66
- Determine Your FRA: Confirm your specific full retirement age using the SSA's official chart based on your birth year. [https://www.ssa.gov/benefits/retirement/planner/whileworking.html]
- Estimate Your Earnings: Calculate your expected work income to see if you will exceed any earnings limits. Remember, only wages and self-employment income count towards the limit.
- Contact a Financial Advisor: Get professional advice on navigating Social Security rules, pensions, and tax implications.
- Inform the SSA: If receiving benefits while working, notify the SSA of your estimated earnings and update them if they change.
- Re-evaluate Your Employment: If earnings limits are a concern, consider delaying benefits until you reach your FRA to work more freely and potentially increase future benefits.
Conclusion
Working at age 66 can be managed effectively by understanding the critical role of your full retirement age. While reaching your FRA eliminates earnings limits, retiring earlier or mid-year involves specific rules and potential benefit adjustments. By understanding your FRA, monitoring your earnings, and seeking expert guidance, you can integrate work into your retirement plans successfully.
