10 Reasons To Delay Collecting Social Security if You’re Still Working

Social Security benefits are primarily intended to support retired workers who are now living on their savings instead of a steady paycheck. 

However, you can start collecting Social Security payments as soon as you turn 62, regardless of whether you're retired or still in the workforce. But just because you can claim benefits doesn’t necessarily mean you should.

Here are 10 crucial facts about how Social Security benefits work to help you decide whether or not to delay collecting Social Security while you're still working for a less stressful retirement.

Calculate your full retirement age before deciding whether to collect benefits at age 62 or upon retirement. 

Why? If you start collecting benefits before your full retirement age, the amount you receive each month is permanently reduced.

Your full retirement age depends on the year you were born:

• Born between 1943 and 1954: Age 66
• Born in 1955: Age 66 and 2 months
• Born in 1956: Age 66 and 4 months
• Born in 1957: Age 66 and 6 months
• Born in 1958: Age 66 and 8 months
• Born in 1959: Age 66 and 10 months
• Born 1960 onward: Age 67

If you were a New Year’s Day baby, use the year just before you were born to calculate your retirement age. 

For instance, if you were born on January 1, 1958, your full retirement age is 66 and six months.

Unless you retire early, you’ll probably still be working at age 62, when you can start receiving monthly Social Security payments.

However, you won’t automatically start receiving benefits. You need to apply online to get started. You can also apply over the phone by calling 1-800-772-1213 or TTY 1-800-325-0778 for individuals who are deaf or hard of hearing.

If you apply for and start receiving Social Security benefits at age 62, you’ll receive less per month than you would if you claimed benefits at your full retirement age. 

Depending on how early you opt to receive benefits, your monthly check could be permanently reduced by as much as 30%.

Let’s say you were born in 1960, which means your full retirement age is 67, but you apply for benefits at exactly 62. Per the Social Security Administration, here’s how much of your full benefit you’ll receive from the time you start receiving benefits until your death:

• Age 62: 70% of full benefit
• Age 63: 75% of full benefit
• Age 64: 80% of full benefit
• Age 65: 86.7% of full benefit
• Age 66: 93.3% of full benefit
• Age 67: 100% of full benefit

For every month closer you are to your full retirement age, the higher the percentage of your full Social Security benefit you’ll receive.

For instance, if your retirement age is 67 but you start receiving benefits the month you turn 62, you’ll get just 70% of your full benefit. But if you wait to claim benefits until you’re 62 years and five months old, you’ll get 72.1%. At 62 1/2, you’ll receive 72.5%, and so on.

That percentage change might seem small, but the difference between receiving 70% and 72.5% of your benefit each month will add up over the decades.

If you can, delay applying for benefits for an extra month. It might not seem like a big difference to 62-year-old you, but your 85-year-old self will be grateful for the extra cash.

Along with how many months you are from reaching full retirement age, your Social Security benefit can also be reduced based on how much money you make. 

Each year, the SSA sets an earnings threshold that, if exceeded, triggers a further reduction in the retirement benefits you receive between now and the month you reach your retirement age.

For 2024, the individual earnings limit is $22,320. If you earn more than that amount per year while receiving Social Security benefits, you’ll have $1 deducted from your benefits for every $2 over the limit you earn.

For example, if you earn $5,000 more per year above the $22,320 limit, you’ll have $2,500 deducted from your annual Social Security benefit.

If you’re receiving Social Security benefits the year of your full retirement age, the threshold for an earnings-based benefits reduction increases to $59,520. Additionally, you’ll have $1 deducted for every $3 you make over the earning limit, not every $2.

In this case, if you earned $6,000 over the $59,520 limit, your total benefit would be reduced by $2,000.

Only income earned at your job — or, if you’re self-employed, your annual net profit — counts toward the annual earnings limit of $22,320 in the years before you reach retirement age or $59,520 in the year you reach retirement age.

While this includes sales commissions, bonuses, and paid time off, it excludes income from sources like investments, pensions, or interest payments.

As soon as you reach your full retirement age, the earnings cap on Social Security benefits disappears. 

No matter how much you make — and regardless of whether you leave the workforce the month of your birthday — your earnings will cease to impact your overall Social Security benefit.

The SSA calculates Social Security benefits based on your earnings average during the 35 years you earned the most money. 

If the years between your 62nd birthday and the year you reach full retirement age are among your top-earning years, the SSA will adjust your Social Security payment accordingly, meaning your monthly payment will go up.

The lower-earning spouse in a married partnership can receive up to half the amount of their partner’s Social Security benefit. 

However, if you apply for spousal benefits before your full retirement age, you’ll receive a decreased percentage of your spouse’s total benefit for the rest of your life.

For example, if your full retirement age is 67, here’s how much of your spouse’s benefit you’ll receive based on when you start receiving benefits:

• Age 62: 32.5%.
• Age 63: 35%.
• Age 64: 37.5%.
• Age 65: 41.7%.
• Age 66: 45.8%.
• Age 67: 50%.

If you’re thinking of taking Social Security benefits at age 62 due to budget constraints, you might want to consider other ways to boost your monthly income first. 

Finding ways to make extra money, like picking up a side gig, might be enough to help you delay collecting benefits so you don’t have to take a permanent reduction.

Now that you know more about how working impacts Social Security benefits, you’re better prepared to decide if claiming benefits at 62 makes sense.

If you’re concerned about when to retire, talk to a financial advisor or retirement planner who can offer advice specific to your situation. You want to avoid wasting money at this stage of your life.

Once you have a solid retirement plan, including when to apply for benefits, you can look forward to enjoying your golden years with as little financial stress as possible.