Who receives Social Security while working—and why do they do it? – Center for Retirement Research

Social Security was originally designed for retirement.

However, many older adults report receiving both wages and Social Security benefits. This pattern is surprising because there are huge advantages to claiming benefits as late as possible—monthly benefits taken at age 70 are 76% higher than those taken at age 62—and because the earnings test for people below full retirement age (FRA) temporarily withholds some benefits.

How many people are both working and receiving benefits? Why do they do this? To answer these questions, my colleagues Siyan Liu and Laura Quinby used Health and Retirement Research (HRS), A survey conducted every two years on a sample of households that contains detailed information on Social Security claims, employment, and income. Using HRS data from 1992 to 2022, they followed individuals every two years from age 56, when the vast majority are still in the labor force, to age 75, when most are fully retired.

The results show that working while receiving Social Security is fairly common—43% of respondents aged 56 to 75 combined work and benefits at least some of the time (see Figure 1).

Who are these people? To gain some insight, the authors focused on the filing age of these worker beneficiaries. As shown in Figure 2, two-thirds of these individuals filed their claims before FRA (usually at age 62), while the other 30% filed between FRA and age 69 (usually at FRA). This pattern indicates different circumstances and different grounds for claims.

Those who file early may do so because they are unable or choose not to continue working full-time and need Social Security benefits to cover their expenses. In fact, this group is less likely to have a college education than later applicants and more likely to be employed part-time. Additionally, worker beneficiaries who file early typically have lower pre-petition incomes than late filers, and their incomes drop significantly when they stop working full-time. Specifically, when they stopped working full-time, their median income fell by nearly half, from $38,700 to $16,500, a gap they were unable to fully offset even with Social Security (see Figure 3).

The pattern of those who filed claims after FRA is harder to understand. They seem to earn almost as much as they receive while working. Therefore, they appear to be able to defer claims until age 70, when they would receive their maximum monthly benefit. However, they chose to file their claim early. Part of the explanation may be that for those born in 1943, the reward for taking it later—the relatively new delayed retirement credit—reaches only 8 percent. If the novelty and evolution of delayed retirement credits is an explanation, one would expect more deferrals to age 70 among wealthier older workers in the future.

The more important implication of this study, however, is that most worker beneficiaries are low-income earners who need Social Security benefits to pay their bills.