Social Security serves as a financial cushion for many seniors. That’s why it’s important to carefully consider how long you work and how early you should start receiving your paychecks each month to maximize benefits.
If you are age 65 and still working, it may be very important to review all of your options before you retire – and potentially work for a few more years. You’re just short of full retirement age, and working past age 65 can make a big difference in your income. While you may consider applying when you’re 65 since you’re eligible for Medicare, there are a few important details to consider.
65 is not the full retirement age
When you turn 65, you become eligible for Medicare. Although Medicare does not cover all health-related expenses, it can be a good insurance policy as you approach retirement. However, that doesn’t mean you have to start receiving Social Security benefits. The full retirement age is 67 for anyone born in 1960 or later, and filing before full retirement age while working can result in withholding of benefits.
Social Security will withhold part of your benefits if you earn more than a certain amount and are under 67. Delaying your benefit for too long can prevent deductions, and delayed retirement credits can accumulate if you continue to delay Social Security. You can increase your Social Security benefits by waiting to claim them until you’re 70.
Social Security has several benefit calculators you can use to estimate how much you’ll get based on your lifetime earnings and when you plan to claim benefits. These calculators show the benefits of waiting longer, and doing so can increase your lifetime earnings, especially if you have a steady income in your current job. Higher lifetime benefits translate into higher Social Security benefits.
Working while suing can temporarily reduce your paychecks
If you get $2,000 a month from Social Security if you claim at age 65, you won’t actually save $2,000 a month if you’re still working. That’s because Social Security will withhold $1 in benefits for every $2 earned above a predetermined earnings limit if you’re under your full retirement age.
That limit is $24,480 in 2026. Retained earnings don’t just disappear; The Social Security Administration recalculates your future benefits to give you credits for the months your benefits were reduced.
The limit becomes larger the year you reach full retirement age. Then, Social Security only withholds $1 for every $3 over the upper limit, which is $65,160 in 2026.
Medicare, taxes and cash flow should be part of the same decision
When you turn 65, you don’t automatically decide about Social Security. You are eligible for Medicare during that time, even if you are still working and not taking Social Security. Some workers can delay Medicare Part B without penalty as long as they have coverage from an eligible employer. However, if you don’t qualify, you may face late registration penalties.
It’s also important to consider how taxes will affect your take-home pay if you claim Social Security. A higher income will make more of your Social Security benefits taxable. Getting the immediate benefits may not be worth the long-term impact of losing cash flow growth, especially if you can’t cover your living expenses adequately.
Two other details to consider are spousal benefits and how long you plan to work. High-earning spouses may want to delay until 70 or as close to that number as possible. That’s because the surviving spouse’s benefit is based on the Social Security benefit of the highest earner. People who plan to work a few more years after turning 65 are also encouraged to wait until age 70 or as close to that age as possible.
