Yes, you can start to collect Social Security retirement benefits even if you're still working. But it isn't always a good idea. This article lays out the major pros and cons to consider.

Key Takeaways

  • You can take Social Security benefits while you're still working.
  • If you're under your full retirement age, however, your benefits will be temporarily reduced.
  • Once you reach full retirement age, there's no limit on how much you can earn while collecting full benefits.

Pros and Cons of Collecting Social Security While Working

If you're eligible for Social Security, you can start collecting your benefits as early as age 62. You can also continue to work. But unless you've reached your full or "normal" retirement age (such as 66 or 67), you'll be doubly penalized:

  • By taking Social Security early, you'll be accepting a benefit that is permanently reduced.
  • If you earn over a certain amount, your benefits will be temporarily reduced.

By contrast, if you wait until full retirement age to collect, you'll get your full benefit regardless of whether you're working at the time or how much you're earning. If you can wait even longer to collect, you'll also avoid being penalized—plus your benefit will increase another 8% for each year you delay, up to age 70. At that point your benefit maxes out and there is no further incentive to delay.

How Social Security Calculates Your Benefit

The amount you receive in Social Security benefits is based on an average of your 35 highest-earning years. So if you're earning more now than ever before, your best bet is to keep working, if that's possible, and delay receiving benefits until age 70. You'll then be eligible for your maximum benefit.

On the other hand, if you keep working but start taking benefits early, you may run up against the Social Security income limits. For 2021, Social Security will deduct $1 of every $2 you earn over $18,960 if you are under your full retirement age. During the year you reach full retirement age, it will deduct $1 for every $3 you earn over $50,520 until the month you reach full retirement age. After that, you'll receive your entire benefit. 

Note that any money Social Security withholds from your benefit isn't lost forever. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that were withheld earlier.

The reduction in Social Security benefits for people who earn over a certain amount is based only on earned income. Unearned income, such as from pensions or investments, doesn't count.

The Bottom Line

You can begin collecting Social Security benefits while you're still working, but your benefits will be reduced if you're younger than your full retirement age. If you're in that situation, it's worth estimating how much you expect to earn and how much that will reduce your benefit. Once you know how much you're likely to receive from Social Security, you can decide whether having that extra money now outweighs the advantages of waiting to claim benefits until later.