Q: I understand that I can receive Social Security benefits while I’m still working. I’m 64 but my earnings are pretty modest. I have about $75,000 in savings and the mortgage on my home will be paid off later this year. What are your thoughts on starting Social Security at 64 and continuing to work?
A: Without a doubt, the idea of starting Social Security benefits before you reach your full retirement age has strong appeal. But consider this: statistics indicate that about half of today’s working age households who are close to retirement age will not be able to maintain their standard of living in retirement.
People frequently overestimate the amount of money they will receive from Social Security benefits. Lifespans are growing longer, and ideally you will want your savings to last over the length of your retirement that could be as much as 25 to 30 years long. At the same time life expectancy is rising, so are healthcare costs. If you talk to folks who have already retired, you will learn that almost 6-in-10 retirees will report that healthcare costs take one-fourth to one-third of their Social Security benefits.
Based on your current age, your full retirement age is 66. That’s the age when you can retire and receive the full, unreduced amount of your benefits. If you start benefits at age 64 your benefit will be reduced 20%. For example if you are eligible for $1,200 at age 66 you would only receive $960 per month at age 64.
But when you work, there’s a limit to how much you can earn and still keep your benefits. When you are under full retirement age, your Social Security benefit will be reduced $1 for every $2 you are over the earnings limit.
Example: In 2018 you are allowed to earn $17,040 per year or $1,420 per month without Social Security withholding any of your benefits. Let’s say you earn more, $1,900 per month. That would mean you would earn $480 more than the limit. Social Security would reduce your benefit by $240 per month, leaving you with just $720 per month ($960 - $240 = $720). In addition, your earnings would also subject a portion of your Social Security benefits to taxation.
According to TSCL’s 2017 Senior Survey, 8% of survey respondents said that their benefits have been withheld by Social Security due to excess earnings. Unless you have a terminal illness and are not expected to live very long, we strongly recommend that you consider delaying the start of your Social Security benefit until you are 66 or older when you will be eligible for the full, unreduced amount. To get the maximum, consider working until age 70 if you can. Your benefit will grow by 8% per year if you do.
To learn more about how work affects your benefits, call the Social Security Administration toll free at 1-800-772-1213 and ask for How Work Affects Your Benefits
Publication No. 05-10069.