• Chris Stein, CFP®

Working After Full Retirement Age

We recently had a question come in where the person asked the following:

“I just turned 66 this year (in 2015) and have gone back to work part time.  I started collecting Social Security benefits a couple years ago.  When I got my first paycheck I saw they withheld FICA taxes.  Should they have done that and how does it affect my Social Security benefit?”

There are a couple of moving parts to this.  Let me tackle them one at a time.

  1. Since you have reached your full retirement age (FRA) you can go back to work and earn whatever amount you wish with no reduction in your SS benefit, other than possibly causing more of your benefit to be subject to taxes.

  2. Yes, it is correct that they withhold FICA taxes from your paycheck. Whenever you work a job that is subject to those tax withholding amounts the employer is required to collect them and send them in, regardless of your age or your Social Security claiming status.

  3. The fact that you now have a job may actually increase your future Social Security benefits. Every year Social Security looks at your earnings record and if the earnings this year are better than a previous year in your record then these new earnings will be used in an updated calculation for your PIA, which will lead to a higher benefit.

  4. Some people worry that taking a part time job like this could actually decrease their PIA, but after you reach age 62, any subsequent earning years can only INCREASE your benefit, they will NEVER DECREASE them.

One additional thing of note, you may very well pay additional FICA taxes and never see an increase in your benefit.  That is due to the way Social Security is calculated.  It is not directly calculated from the taxes collected, but rather on your best 35 years of wage inflation indexed earnings.  If this part time job never pays you enough to have a previous lower earnings year replaced with a higher year your benefit will never increase due to your work.

For more information on this topic, please use the play button below.


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