By Diane M. Wilson CFP® Work, job, or career. Whatever we call our labor, some cannot wait to step away while others want to continue working even after reaching full retirement age (FRA). If an individual claims Social Security benefits and continues to work, what impact do those earnings have on the benefit amount, and will it increase their Social Security benefits? Some will receive a nice increase in their benefit amount while others will receive a smaller increase.
What happens if I continue to work?
If you continue to work and pay Social Security taxes while receiving benefits, the administration will check your record every year to see whether the additional earnings will increase your monthly benefit. If there is an increase in benefits, you will receive a letter informing you of your new benefit amount.
Social Security looks at your highest 35 years of annual earnings to compute your benefit amount. If the years you are working and receiving benefits are among your highest paid, this may increase your overall benefit. Every new year of wages will trigger the recalculation. This is true until you quit working, even while working in your advanced years.
For individuals who already have 35 years of high income, benefit amounts may not increase much. For those who do not have 35 years of work history, a current work year will replace a work year with zero earnings. These individuals may see higher increases in their benefit amount while they continue to work and inch towards receiving those thirty-five work years. Those whose earnings early in their work life were lower than the average wage of that individual year, and currently have higher earnings later in their work life, may also see a better increase in benefits.
Continuing to work may offer many benefits to those who stay employed. Socializing with coworkers, being a productive member of society, and having something to do are all beneficial. To also receive a larger Social Security benefit, is like the proverbial icing on the cake.