Working While Collecting Social Security Benefits

Recently, my husband posed this question: “can I work and collect Social Security benefits?” I didn’t know the answer at the time but discovered that, in general, “yes.” But a more important question is: “should I work and collect Social Security retirement benefits?” The response to this question requires additional research.

For the scope of this article, I won’t delve into the nuances of how working could enhance a sense of well-being and purpose or how the costs associated with working (commuting expenses, for example) might detract from its financial value. Instead, I’ll consider how working while collecting benefits could affect 1) monthly paychecks received in the present; 2) Social Security retirement benefits in the future; and 3) income taxes.

Choices for Starting Social Security Benefits (Spreadsheet)

When I decide to start receiving benefits affects my monthly Social Security check for the rest of my life. That is, if I choose to collect checks prior to normal retirement, then the monthly amount is reduced; likewise, if I wait until I’m past regular retirement age, I receive a bigger monthly check. So, among the retirement decisions that I need to make, this one seems fairly significant.

Why 401(k) Default Options May Not Be Enough

I’ve been reading Misbehaving: The Making of Behavioral Economics by Richard H. Thaler. A point of interest is the discussion of automatic enrollment in 401k plans. Automatic enrollment may get employees started saving for retirement. But 401k default options associated with this type of sign-up (such as an investment choice of a money market fund and a savings rate of 3%) may be unlikely to help employees achieve the outcomes needed for a comfortable retirement.

According to Thaler, “Both of these default choices — the money market investment option and the 3% savings rate — were not intended by the employer to be either suggestions or advice. Instead, these options were picked to minimize the chance that the company would be sued.”

So, what’s the story about these default options?

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