Can You Work During Retirement and Collect Social Security? Understanding the Limits

Of all the people who receive Social Security benefits, more than 80% are retirees (the other 18% are disabled workers or young survivors). 1 Yet, although it is a progressive benefit (meaning it gives recipients cost-of-living increases), it’s not always enough for retirees to live on.

So, for some recipients, working during retirement is a necessity. At the same time, there are some of us who continue to work in retirement because we want to. Regardless of the reason you might think about working in retirement, there are things to consider as you plan for retirement and how your post-retirement income could affect your benefits. Your financial advisor can answer a lot of your questions about working and Social Security, including the costs, benefits, and risks.

Keep in mind, Social Security rules change, so for the latest rules, limits, benefits and guidelines, check with your financial advisor or the Social Security website at And, of course, if you do not have a financial advisor, feel free to reach out to Lundervold Financial. Although we are based in Minnesota, we work with clients all over the United States.

Social Security Retirement Age

U.S. citizens who retire at age 62 can start collecting Social Security benefits, but the SSA will reduce your benefits by a certain percentage until you reach your full retirement age, which is calculated (as of December 2020) using the table below.

Year of Birth Full Retirement Age
1943 to 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

If you delay your retirement until age 70, you could receive more benefits from the SSA. The SSA has some handy retirement calculators:

  • Retirement age calculator (you enter the year you were born, and they produce a table showing your benefits per year until you reach full retirement age).
  • Retirement estimator (you’ll need your basic info, including mother’s maiden name plus your most recent annual earnings in order to estimate your SSA earnings at age 62, at full retirement age, and at age 70).

You might want to sign up for SSA’s Compass newsletter, which they deliver by e-mail to cover an array of retirement-related news topics, including changes to Social Security and Medicare benefits. Your financial advisors at Lundervold Financial stay on top of these important federal updates, so our clients don’t have to worry about the details. We know how confusing the details can be for our clients; since we live and breathe financial matters, we stay on top of changes to Social Security retirement benefits, including earnings limits, which are updated every year.

Social Security Earnings Limits

When you retire and collect Social Security benefits, you can continue to work, but the Social Security Administration can (and will) deduct payments from your benefits once you hit an annual earnings limit. The earnings cap changes every year. The earnings cap differs depending on your age at retirement.

In the year you reach full retirement age (FRA), the SSA will deduct $1 from your benefits for every $3 you earn above the limit of $48,600. This only applies to the months before FRA; once you reach the month of your full retirement age, you will receive your full benefit no matter how much you earn. Those earnings limits change every year, so if you have questions about earnings limits for 2021, let us know.

Social Security Cost of Living Adjustments

Every year, the Social Security Administration gives a cost-of-living adjustment (COLA) to its recipients.3 The percentage increase is based on a formula that the SSA built based on something called the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is determined by the Bureau of Labor Statistics. Unfortunately, Social Security COLA history tends not to match the increases in healthcare and medical costs.

Analysis by the Senior Citizen League shows that over the past 20 years, Social Security COLAs have increased a total of 53%, but the cost of goods and services that retirees typically purchase, including health care, housing and food, rose 99.3%, almost twice as much. In fact, Medicare Part B and prescription drug costs have more than tripled since 2000, the League says.4 This means that Americans need to plan for their own medical care in retirement and should not rely solely on Medicare.

Retirement Planning and Social Security

Simply put, the longer you wait to retire, the more benefits you will receive from the U.S. government. Social Security was never intended to be our “Plan A” for retirement. It was meant to supplement our income in retirement. We pay into it in our younger years and collect from it in our later years. Unfortunately, too many people realize too late that they will need additional streams of income when they retire.

That’s one of the reasons we at Lundervold Financial are committed to working with our clients to help them prepare for retirement. We’re passionate about helping our clients understand and prepare for retirement, no matter what age.

Are you ready for retirement? Do you have enough set aside so you can continue to live comfortably? Have you taken into account increased medical expenses as you age?

There is no single answer that applies to every one of us. And although the calculators you’ll find online can be helpful, they fail to paint the whole picture that pertains to your unique situation. Meet with a financial advisor for a no-obligation assessment today, to prepare for your financial needs tomorrow.

1 Center on Budget and Policy Priorities. Aug. 13, 2020. Policy Basics: Top Ten Facts About Social Security. Accessed Dec. 11, 2020.

2 Social Security Administration. Starting Your Retirement Benefits Early. Accessed Dec. 22, 2020.

3 Social Security Administration. Latest Cost-Of-Living Adjustment. Accessed Dec. 22, 2020.

4 Sean Williams. The Motley Fool. Dec. 4, 2016. 25 Social Security Facts & Figures You Need to See. Accessed Dec. 22, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Neither our firm nor its agents or representatives may give tax or legal advice. Be sure to speak with a qualified professional about your unique situation.

Our firm is not affiliated with the U.S. government or any governmental agency.

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