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It Does Pay to Work in Retirement

Category: Financial and taxes in retirement

March 29, 2011 — One of the persistent myths about retirement is that it doesn’t pay to work after you start collecting social security. The thinking goes is that because if you start collecting before your full retirement age your benefits are reduced, and because you will be taxed on a portion of your benefits if your overall earnings pass a certain threshold, you will be worse off for working.

A very helpful article from WSJ MarketWatch Editor Robert Powell, “Taxing Problem: How to Keep Working and Collecting Social Security“, clearly explains why this thinking is off base. As Michael Kitces, editor and publisher of The Kitces Report says in the article “… frankly, I’ve never seen a situation where there was actually a net loss for working.” He goes on to say that by working you bring additional dollars into the household. Uncle Sam gets to keep part of that, and you get to keep part. Everybody is ahead vs. ….

not working.

If you start collecting social security before your full retirement age (usually 66, depending on your age), your benefit will be reduced by $1 for every $2 you earn (that goes to $1 for every $3 in the year you reach

full retirement, and the reduction disappears entirely when you hit full retirement”. The income threshold for taxation of your social benefit is $25,000 – if your combined income reaches that level, 50% of your social security benefit will be taxed. That level goes up to 85% when the combined income reaches $44,000.

A recent study from Scarborough Research, “Retire for Hire Study“, found that not only do working retirees have higher incomes and investments, but they are more active and engaged in activities like gardening, the arts, and philanthropy. The study found that about 15% of retirement-age adults are still working.

Comments. Please use the Comments section below to let us know about your earning strategies in retirement.

For further reference:
When Should You Start Taking Your Social Security Benefits?

Posted by John Brady on March 29th, 2011


  1. I am a retired uaw member, I will be 62 in nov 2012, I am working in another job after 30 years with the uaw, I currently earn over 34,000 should i wait until 66 to start collecting ssi, My Pension will be reduced 10 months after
    I turn 62, I would like to wait until 66 to file SSI, and plan to work until
    I hit 70. what should I do? any ideas, I am financially sound

    Editors note: You should read our new article on Social Security, which directly addresses your question.

    by Robert — April 5, 2011

  2. […] further reference: It Pays to Work in Retirement When Should You Start Taking Your Social Security Benefits 10 Things You Need to Know Before You […]

    by » What You Think You Know about Social Security Could Hurt You – Part 1 Topretirements — April 24, 2012

  3. Can you raise the amount of social security you receive by continuing to work after you have started taking benefits? Especially if you only had about 20 years of work used in the calculation Social Security did to determine your benefits.

    Editor’s note: Yes, you can raise the amount you receive by continuing to work after you start taking benefits, up until age 70. In your case in particular, where you only have 20 years of work included in the calculation that would probably be a help.

    by brenda sharp — April 26, 2012

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