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Q&A: What happens if I go back to work after starting Social Security

If you are under full retirement age, some or all of your benefits may be withheld. $1 will be withheld for every $2 that you earn over the earnings test threshold, which is $16,920 in 2017. But this is not a reason to not go back to work. In fact, it may be a good reason to go back to work, because your benefit will be recomputed at Full Retirement Age to remove the actuarial reduction for those months in which your benefit was withheld. In other words, it will raise your benefit going forward.

Let’s say your PIA is $2,000 and you applied for benefits at 62. Your reduced benefit is $1,500 (75 percent of $2,000). At age 64, you go back to work and earn enough so that all of your benefits are withheld. When you turn FRA (66), your benefit will be recomputed to make it as if you had applied at age 64. Going forward you will get 87.5 percent of $2,000, or $1,752. Then, if you were to suspend your benefit at FRA, you can earn 8 percent annual delayed credits on the $1,752. When you claim your benefit at 70, it will be $2,310 (not counting cost-of-living adjustments or the effect of additional earnings). 

Going back to work is a great way to increase your Social Security benefit, and benefit from the earnings themselves.

Can I receive a spousal benefit based on my husband’s work record?

Possibly. As the spouse of a worker entitled to Social Security benefits you may be able to receive 50 percent of your spouse’s PIA if you apply for it at your full retirement age. Your husband must be receiving benefits in order for you to apply for a spousal benefit. If he wants to delay his benefit to receive the maximum amount, you may have no choice but to wait until he applies to start your spousal benefit. Calculators can help you determine the best time to apply, taking into account spousal benefits and delayed credits.

Generally, you can only receive a spousal benefit if it is higher than your own benefit. When you apply, you will be paid the higher of the two benefits. Let’s say your primary insurance amount (PIA) is $1,400. Your husband’s PIA is $2,600. Half of that is $1,300. Since your PIA is higher than your spousal benefit, you would generally not be paid a spousal benefit.

But if you were born before Jan. 2, 1954, you may be able to get a spousal benefit while your own benefit builds delayed credits. This “claim-now-claim-more-later” strategy is being phased out because Congress considered it a loophole that only “wealthy” people were taking advantage of.

But if you had turned 62 before the end of 2015, you are grandfathered under the old rules. This means you can file a restricted application for your spousal benefit at full retirement age and receive 50 percent of your spouse’s PIA from age 66 to 70. At age 70 you would switch to your own maximum benefit. 

Mark Singer, CFPⓇ, lives in Swampscott and has been in the financial industry for over three decades. If you have any questions contact him at 781.599.2660 or mark@55retire.com. The content was developed in conjunction with Elaine Floyd, CFP®.

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