Planning to Work While Claiming Social Security Early? Brace Yourself for This.

Source The Motley Fool

You can't claim Social Security retirement benefits until you turn 62, but there's no rule saying you have to be retired to do so. Many Americans choose to receive benefits while they're still working.

For some, it's a chance to enjoy a higher standard of living than they could off their paychecks alone. For others, it gives them the opportunity to gradually reduce their hours without affecting their monthly income.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

These strategies work well for some people. But for a certain group of workers, claiming Social Security while working comes with a hidden cost.

Two businesspeople discussing something in an office.

Image source: Getty Images.

Early claiming comes at a cost

The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. It's 67 for most workers today, though some older adults have FRAs as early as 66. You're allowed to apply sooner than this, but if you do, it's considered claiming early.

This gets you more checks, but it also reduces the size of each one. You lose 5/9 of 1% per month for up to 36 months of early claiming and 5/12 of 1% per month thereafter. Those with FRAs of 67 can lose up to 30% by applying for benefits right away at 62.

Early claimers who continue to work are at risk of even greater benefit reductions due to the earnings test. Under this rule, $1 is withheld from their benefits for every $2 they earn over $23,400 in 2025 if they will be under their FRA all year. Those who will reach their FRA in 2025 only lose $1 for every $3 they earn over $62,160. If they are at or over their FRA, they don't have to worry about the government withholding money from their checks for the earnings test, regardless of their annual income.

It's possible that some workers could get nothing from Social Security because of the earnings test. That could be a problem if they had counted on that extra income to cover some of their current expenses, but the withheld benefits are not gone forever.

Withheld funds come back to you after FRA (slowly)

Those who have money withheld due to the earnings test get it back in the form of a benefit adjustment at FRA. The government looks at how much it withheld previously and uses this information to determine the size of the increase. This is a one-time change. After this, you'll continue to get your new, higher amount for the remainder of your life with only small increases for cost-of-living adjustments (COLAs).

Though this is better than losing the money altogether, it might be less desirable for some than getting that extra money today. It may not always be possible, but if you can limit how much income you earn from your job, you might be able to minimize how much the earnings test takes from you or even avoid it altogether.

Keep an eye on your income throughout the year. And if you notice your Social Security checks begin to shrink due to the earnings test, you might have to adjust your budget accordingly.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold Price Forecast: XAU/USD edges lower below $4,200 amid worries about hawkish Fed rate cutGold Price (XAU/USD) trades in negative territory around $4,195 during the early Asian session on Tuesday. The precious metal edges lower amid concerns that the US Federal Reserve (Fed) will adopt a hawkish tone in its rhetoric, despite delivering a rate cut on Wednesday. 
Author  FXStreet
Dec 09, Tue
Gold Price (XAU/USD) trades in negative territory around $4,195 during the early Asian session on Tuesday. The precious metal edges lower amid concerns that the US Federal Reserve (Fed) will adopt a hawkish tone in its rhetoric, despite delivering a rate cut on Wednesday. 
placeholder
Silver Price Forecast: XAG/USD refreshes record high, looks to build on move beyond $61.00Silver (XAG/USD) enters a bullish consolidation phase during the Asian session and oscillates in a narrow range near the all-time peak, around the $61.00 neighborhood, touched this Wednesday.
Author  FXStreet
Dec 10, Wed
Silver (XAG/USD) enters a bullish consolidation phase during the Asian session and oscillates in a narrow range near the all-time peak, around the $61.00 neighborhood, touched this Wednesday.
placeholder
Solana Bulls Eye $145 Breakout as Institutional Flows and Derivatives AlignSolana (SOL) targets a breakout above $145 as four days of ETF inflows, rising futures open interest, and growing on-chain liquidity signal a return of bullish momentum.
Author  Mitrade
Dec 10, Wed
Solana (SOL) targets a breakout above $145 as four days of ETF inflows, rising futures open interest, and growing on-chain liquidity signal a return of bullish momentum.
placeholder
Gold Price Forecast: XAU/USD drifts higher above $4,200 as Fed delivers expected cutGold price (XAU/USD) gains momentum to around $4,235 during the early Asian session on Thursday. The precious metal extends its upside after the US Federal Reserve (Fed) delivered an expected third consecutive interest rate cut and maintained its outlook for just one cut in 2026.
Author  FXStreet
Yesterday 01: 39
Gold price (XAU/USD) gains momentum to around $4,235 during the early Asian session on Thursday. The precious metal extends its upside after the US Federal Reserve (Fed) delivered an expected third consecutive interest rate cut and maintained its outlook for just one cut in 2026.
placeholder
Gemini Deepens Ripple Ties with RLUSD Rollout as Derivatives Arm Secures CFTC NodGemini integrates Ripple's RLUSD on XRPL and secures a CFTC license for prediction markets, though XRP price struggles at $2.02 despite strong ETF inflows.
Author  Mitrade
18 hours ago
Gemini integrates Ripple's RLUSD on XRPL and secures a CFTC license for prediction markets, though XRP price struggles at $2.02 despite strong ETF inflows.
goTop
quote