In a recent survey, 70% of current workers stated they plan to work for pay after retiring. And that possibility raises an interesting question: How will working affect Social Security benefits? To answer that question requires an understanding of three key concepts: full-retirement age, the earnings test, and taxable benefits.
Full Retirement Age
Most workers don’t face an “official” retirement date, according to the Social Security Administration. The Social Security program allows workers to start receiving benefits as soon as they reach age 62—or to put off receiving benefits until age 70½ “Full retirement age” is the age at which individuals become eligible to receive 100% of their Social Security benefits. For example, individuals born in 1955 can receive 100% of their benefits at age 66 years and 2 months.
Starting Social Security benefits before reaching full retirement age brings into play the earnings test. If a working individual starts receiving Social Security payments before full retirement age, the Social Security Administration will deduct $1.00 in benefits for each $2.00 that person earns above an annual limit. In 2012, the income limit was $14,640.