Many people continue to work beyond retirement age, either by choice or out of necessity. But if you are receiving Social Security benefits, working may affect your benefit payments. Earning income above Social Security thresholds can cause a reduction in benefits and mean your benefits will be taxed. 

If you work and are “full retirement age” or older, you may keep all of your benefits, no matter how much you earn. You must attain your “full retirement age” before being eligible to receive your full monthly Social Security benefit. If you were born January 2, 1942, through January 1, 1943, your full retirement age for retirement insurance benefits is 65 years and 10 months. If you were born January 2, 1943, through January 1, 1955, then your full retirement age is 66. Full retirement age gradually increases for younger individuals, and for some full retirement age is 67. If you are younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits. If you are younger than full retirement age during all of 2008, then $1 is deducted from your Social Security benefits for each $2 earned above $13,560. In the year you reach full retirement age, you can earn up to $36,120 (in 2008) without having a reduction in benefits. However, if you exceed $36,120 in earnings, Social Security will deduct $1 from your benefits for each $3 you earn until the month you reach full retirement age. Once you reach full retirement age, your benefits will no longer be reduced.

Note that if your benefits are withheld, at least some of those benefits will be returned to you in the form of higher monthly benefits once you reach full retirement age. When you reach full retirement age, Social Security will recalculate your benefits to take into account the months in which your benefits were withheld.

Another way that working can affect Social Security is with regard to taxes. If your combined income (Social Security calculates “combined income” by adding one-half of your Social Security benefits to your other income) is between $25,000 and $34,000 (or $32,000 and $44,000, if filing jointly), you may have to pay taxes on 50 percent of your benefits. If your income is more than $34,000 (or $44,000 if filing jointly), then you may have to pay taxes on up to 85 percent of your benefits.

For more information on Social Security, visit Social Security Online – The Official Website of the U.S. Social Security Administration