If you’re in your late 50s or early 60s, you’ve probably considered when to claim Social Security.
Choosing the right time to apply can affect both your current lifestyle and your long-term financial security, so consider your options carefully.
One major consideration is whether you intend to claim benefits while still working. There are both benefits and drawbacks to doing this, so understanding both sides will help you make an informed decision.
Two Benefits of Claiming Social Security While Working
1. Better Financial Stability Now
Combining your paycheck and Social Security benefits can increase your total income, allowing you to live a more comfortable lifestyle.
This can make it easier to spend without depleting your retirement savings prematurely.
2. Potential Increase in Future Benefits
Social Security benefits are calculated using your 35 highest-earning years. If you continue to work and earn more than you did in earlier years, your future benefit amount may increase.
Even if you’ve already claimed Social Security, the administration can increase your payments to reflect your new earnings.
Three Drawbacks of Claiming Social Security While Working
Reduced Monthly Benefits if Claimed Early
If you claim Social Security before reaching your full retirement age (FRA), which is 67 for most people, your monthly payments will be permanently reduced.
Claiming at 62 may reduce your benefits by up to 30%. If you can manage your own income, delaying Social Security may allow you to receive larger payments later.
Higher Risk of Social Security Taxes
Social Security benefits may be taxed if your provisional income exceeds certain thresholds — $34,000 for individuals and $44,000 for couples.
Because wages increase your taxable income, claiming benefits while working may push you into this tax bracket. Waiting until retirement may allow you to avoid these taxes.
Potential Benefit Reductions Due to the Earnings Test
If you claim Social Security before reaching your FRA and continue to work, you may lose $1 for every $2 earned over $23,400 by 2025.
For those who reach FRA in the same year, the threshold increases to $62,160, and you lose $1 for every $3 earned above that amount. While these withheld benefits are eventually restored, they may temporarily reduce your cash flow.
The decision to claim Social Security is based on your financial goals and comfort with these trade-offs.
If you’re willing to accept potential reductions and taxes, filing early while working could provide valuable extra income.
However, if you are concerned about losing benefits or paying higher taxes, waiting until retirement may be a better option.
Also See:- 2 Major Social Security Updates Coming Soon – How They Affect You?
