The Social Security "Raise" Most Retirees Miss: How Working After Claiming Can Boost Your Benefit

You work for decades. You decide to retire. You claim Social Security. And your benefits are set in stone, aside from the annual cost-of-living adjustment (COLA).

That's the sequence of events for most retirees. However, the last part about benefits being fixed permanently, except for COLAs, doesn't have to apply. There's a Social Security "raise" that most retirees miss. Here's how working longer after claiming Social Security can boost your benefit.

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Defying the conventional wisdom

Before I go any further, I'll readily admit that this idea defies the conventional wisdom. And it's true that continuing to work after starting to collect Social Security retirement benefits before your full retirement age can reduce benefits in some cases, albeit temporarily.

The Social Security Administration (SSA) applies an earnings test for anyone who claims retirement benefits before they reach the full retirement age (which is 67 if you were born in 1960 or later) but keeps working. This earnings test provides a disincentive for receiving benefits early in addition to the early retirement penalty.

If you earn more than $24,880 in 2026, collect Social Security retirement benefits, and are under your full retirement age, SSA will withhold $1 in benefits for every $2 in earnings above the limit. If you reach your full retirement age in 2026, SSA will withhold $1 in benefits for every $3 in earnings above $65,160.

The good news is that you'll eventually begin to receive the full amount of benefits withheld once you reach your full retirement age. Also, if you work after attaining this age, SSA won't withhold any benefits regardless of how much you earn.

The little-known secret to boosting your benefit after claiming

Despite the potential for a temporary reduction in benefits due to the Social Security earnings test, retirees may also increase their benefits for the rest of their lives by continuing to work. The reason stems from how SSA calculates retirement benefits.

SSA uses the 35 highest earnings years in determining your retirement benefit. The agency then adjusts those earnings to reflect general wage changes that occurred during the period in which you worked.

How can someone who has already begun to receive Social Security boost their retirement benefit? By continuing to work and making more money over the course of a year than was earned in one of the 35 years SSA used in its calculation. This hurdle may not be particularly tough for many people. Typically, annual earnings are much lower during the early years of a person's career.

By the way, you won't have to do anything to receive a higher benefit. SSA will automatically recalculate your benefit amount based on your latest annual earnings. If you made more money in your last year of working than you did during any of the 35 years the agency used in its previous benefits calculation, your benefit will be adjusted to reflect the higher amount.

Should you work after retiring?

Am I suggesting that many retirees should return to work? Not at all. Anyone who can retire comfortably on their Social Security benefits and other sources of retirement income, such as 401(k) plans, IRAs, and pensions, probably shouldn't give the idea of working again even a second of consideration.

On the other hand, if you claimed Social Security retirement benefits but later realized you aren't receiving enough income to enjoy the lifestyle you want, going back to work could help you in two ways. The obvious advantage is that your income will immediately increase as a result of your earnings. But working just might also permanently increase your Social Security benefits.

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