Should you continue to work full-time or look for part-time work as your last job before retirement? Does it make sense to continue working past when you originally planned to retire?
If you have options, it may make sense to consider Social Security. Your earnings during your final working years can affect your total earnings, especially if you have some low-earning years on your record.
Why your last job matters to Social Security
The Social Security Administration looks at your highest 35 years of indexed earnings to calculate your retirement benefits. If you work in a high-paying job during the last years of your career, that income can replace income recorded during your low-income years. People under the age of 35 who have accumulated work due to unemployment, caregiving or another reason can add additional years to their work experience, which may result in higher benefits. Years without work are counted as “zeros.”
Your expertise and number of hours are not part of the calculation. Social Security only cares about how much you earned in a given year. However, working an extra year does not guarantee a significant increase in your benefits.
Employees are more likely to benefit from another job
Anyone who had a career gap or spent years in a low-paying job but now has high earning potential would likely benefit more from staying at their current job longer, or finding a new one.
Working a few extra years can make sense for people who claim Social Security early and are still working. High income years still affect your benefits and can lead to higher payments going forward. Social Security will also withhold a portion of your benefits if you are past retirement age, depending on how much you earn from your job. Those withheld benefits translate into higher lifetime assessments when you reach full retirement age, which is 67 if you were born in 1960 or later.
How to decide if the job is right for you
If Social Security is a deciding factor, you should first log into my Social Security account and see your projected benefit. This account also allows you to update your income record or low years. This information can lead to an informed, personalized decision instead of following general advice that may not apply to your situation.
A low-earning year-old may benefit more from working longer than a solid, high-earning 35-year-old. But Social Security isn’t the only thing to consider. You should also consider intangible factors such as your health, burnout and job satisfaction. Some people can retire with their savings and use Social Security to cover most of their living expenses. Not everyone needs to wait until age 70 to enter Social Security (although delaying the transfer until then may mean a higher assessment).
The last job you have may not move the needle very well, depending on your average income during your 35 most productive years and how much you earn at your current job. For some, that extra year can make a big difference when it comes to making your money last. That’s why it’s important to review the numbers before giving up forever.
