Working after age 70 could increase your Social Security benefits, if you’re earning a high salary or didn’t have a robust earnings history in your younger years. Let’s break down how you can increase your benefits and how it can impact your taxes and Medicare premiums.
A financial advisor can help you create a financial plan to maximize your savings and investments for retirement.
How Working After Age 70 can Increase Your Benefits
Social Security benefits are based on your top 35 years of earnings. You can see your full earnings record by creating a My Social Security account at SSA.gov.
If you don’t have 35 years of earnings, then making even a minuscule salary after age 70 can increase your benefit slightly because it will replace any year with a zero.
If you do have 35 years of earnings history, then your benefits will only increase if you are earning more in your 70s than the lowest earning year in your history. In this case, the lowest year will be replaced and your benefits will be adjusted slightly.
Social Security was originally created in 1935 to reduce the poverty rate for seniors. SSA’s benefits computation is weighted more heavily towards lower earners. What this means for you is that if you have a lot of zero-income and low-income years, you’ll see a larger increase in your benefits by working.
People with 35 years of high income will not see as big of a jump by working in their 70s, even if they are replacing lower income years.
How to Get a Benefits Increase
You do not need to do anything to get a benefits increase in almost all cases. The Social Security Administration receives your earnings after the Internal Revenue Service accepts the W-2 information from your employer. If you’re self-employed, it will be after your tax return is accepted and processed.
SSA automatically recomputes your benefits. This happens throughout the year and can happen as late as December of the following year. For example, your earnings in 2022 may not be updated until December 2023.
Don’t worry, though, you’ll get a lump-sum back payment for the monthly difference in your benefits going back to the beginning of the year, regardless of how late in the year your benefits are recomputed. If you have direct deposit, you’ll likely see a payment for a seemingly random amount in your account before you even get the letter explaining what it is.
If you set up a My Social Security account, you’ll have access to all of the letters SSA is sending, so you won’t have to wait for an explanation in the mail.
How Working After Age 70 Impacts Your Taxes
As Benjamin Franklin famously said — in this world, nothing is certain except death and taxes. You may be officially on retirement benefits, but you still have to file and pay income taxes.
Social Security benefits are considered part of your taxable income. You’ll pay federal income taxes on up to 85% of your Social Security benefits if you file as single and your combined income exceeds $25,000 or if you file a joint return and your combined income exceeds $32,000.
Working and receiving benefits at the same time will likely push you over this threshold if you weren’t already. Be sure to adjust your withholding on your W-4 at your employer, so you don’t end up with a surprise tax bill after you file. You can also have taxes withheld from your Social Security benefits by printing and filling out a W-4V and mailing it into your local Social Security office.
In addition to federal income taxes, Social Security is taxable in twelve states — Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.
Social Security does not have a way to withhold benefits for state income taxes, so you’ll need to adjust your withholding through your employer or set money aside yourself to pay state taxes when you file.
How Working After Age 70 Impacts Medicare Premiums
Working after 70 can impact your Medicare premiums and your spouse’s if you’re married and earning a high income.
Medicare premiums in retirement are normally subsidized. A portion of Medicare law requires you to pay a greater portion of your own medicare premiums if your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds. In 2022, higher premiums apply if you’re single and your MAGI is over $91,000.01. For married couples filing jointly, the threshold is $182,000.01.
Medicare premiums are based on income from two years prior, meaning that if you worked in 2021 and had a high income, you’ll have higher premiums for 2023. If you experience a life-changing event like job loss, divorce, or retirement, you can request to have your premiums reduced by filling out form SSA-44, attaching proof of your life-changing event, and mailing it into your local Social Security office.
Bottom Line
Working after age 70 can increase your Social Security benefits, especially if you didn’t earn much in your younger years and are earning significantly more now. Keep in mind that increasing your income can affect your taxes and medicare premiums, and plan accordingly.
Retirement Tips for Beginners
- A financial advisor can help you create a financial plan for your retirement needs. SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Aside from the best retirement plans, consider other ways to set aside money for the future. A health savings account, for example, offers a tax-advantaged way to save for medical expenses. If you remain healthy, you could use the money for any purpose at all after age 65 without incurring a tax penalty.
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