How Much Could Working Part-Time Reduce Your Social Security Checks?

Collecting Social Security doesn’t necessarily mean that you’re ready to give up working forever. Many people retire and claim benefits with the plan to still work at least part of the time. This desire to collect benefits and get a paycheck may be inspired by a need to stay busy or may be necessary for financial reasons, especially if you had to claim Social Security because you couldn’t find full-time work or your health didn’t allow you to continue working full-time. 

Regardless of why you’ve decided to work, you should know that getting benefits and having a job isn’t always going to work out the way you expect. That’s because when you work and earn too much, some of your Social Security checks could end up being temporarily withheld. 

If you don’t plan for this, it could create major financial problems, so you need to be aware of the rules. 

Exactly how much will working part-time reduce your Social Security payments?

If you’re just working part-time, it’s easy to assume your Social Security won’t be affected. However, the income thresholds before you begin to lose Social Security income may be lower than you’d initially think. This is an especially big issue if you will be under full retirement age all year. 

Full retirement age is 67 for anyone born in 1960 or later, and it’s the age when you can claim your full standard benefit. Once you’ve reached FRA, you can work as much as you want and not lose any of your Social Security payments. And, if you are working in the year that you will reach FRA, you have a pretty high earning limit. 

In the year you’ll reach FRA, you can earn up to $65,160 before any of your Social Security benefits will be withheld. After hitting that threshold, you lose $1 in benefits for every $3 above it. So, if you earned $70,160, the extra $5,000 would mean that $1,666 of your benefit would be withheld due to extra earnings.  

Unless your part-time job pays a lot, though, this may not be a big issue.

However, if you are not going to reach FRA at all during the year, the earnings limit is much lower. You end up losing $1 in benefits for every $2 earned above $24,480. So, you don’t have to get a huge paycheck from your part-time position to hit this threshold, and your benefits disappear at a higher rate. Earning just $29,480 could cause $2,500 of your Social Security payments to be withheld. 

Does this mean you shouldn’t work while collecting Social Security? 

While it may be disappointing to see part of your Social Security checks disappear because you’re working while collecting benefits, that’s likely not a reason to give up on the idea of having a part-time job. 

Your benefits aren’t gone for good if they are withheld due to earning too much. Your Social Security payment amount is recalculated at your full retirement age to account for missed benefits, so you end up with higher payments later on. This can actually be helpful as you get older and potentially age out of the workforce.

Working even part-time also gives you the chance to invest more and rely less on savings, so you can start to grow your retirement nest egg instead of shrinking it. 

A financial advisor can help you decide how to balance different income sources so you can confirm exactly how part-time work in retirement will impact your finances. But, in almost all cases, it’s going to be a net benefit if you can make it happen, even if it does temporarily mean giving up some of your Social Security checks for a while.