Who Works After Claiming Social Security? – Center for Retirement Research

Introduction

Social Security was designed to replace wages for those no longer working, so claiming Social Security benefits is often used as a simple proxy for retirement. However, trends in employment at older ages cast some doubt on this assumption: many households over 65 report labor earnings as well as Social Security income, indicating that a non-trivial share of workers claim benefits before fully stopping work.¹ Understanding this behavior is important for evaluating households’ retirement preparedness, as well as the design of Social Security, particularly regarding potential increases in the program’s Full Retirement Age (FRA).²

This brief examines the older workers who claim Social Security and work at the same time, addressing two questions: 1) how many are doing it? and 2) what are their characteristics? The discussion proceeds as follows. The first section provides background on Social Security claiming and retirement. The second section documents the share of individuals who ever work after claiming their benefits. The third section describes the demographic and employment characteristics of these worker-beneficiaries. The final section concludes that around 40 percent of individuals do some work after claiming, a pattern that has persisted over time. Twenty-nine percent of individuals seem to use Social Security income to supplement reduced earnings and have limited capacity to delay claiming. Another 13 percent have greater financial flexibility and could more easily delay to increase their monthly Social Security benefits.

Background

Many studies of older households use receipt of Social Security benefits as a simple and straightforward way to classify individuals as retired. That is, they assume most individuals claim around the time they exit employment.³ This assumption reflects the consequential nature of the claiming decision – claiming before the FRA permanently reduces monthly benefits, while delaying until age 70 maximizes them through delayed retirement credits. In many cases, claiming later also increases expected lifetime benefits.⁴ Additionally, the program’s design can discourage claiming while working because beneficiaries under the FRA are subject to an earnings test that temporarily withholds a portion of benefits.⁵

However, growing evidence indicates that Social Security claiming does not necessarily signal full retirement. A quick look at the Current Population Survey shows that many older workers remain in the labor force even after becoming eligible for Social Security (see Figure 1). Indeed, although the labor force participation rate declines sharply after people reach age 62, it remains above a quarter through age 70.⁶ These relatively high labor force participation rates are consistent with recent studies showing that earnings constitute more than a fifth of income for households over age 65.⁷

The persistence of employment after typical claiming ages suggests that some workers claim Social Security and work at the same time. Understanding this behavior matters for evaluating households’ retirement preparedness and the design of the Social Security program. If individuals who work after claiming are disadvantaged and rely on Social Security benefits to supplement reduced earnings, benefit cuts such as raising the FRA may hurt them disproportionately.⁸ Conversely, if they have the financial capacity to delay claiming, policymakers could encourage them to do so. To assess the policy implications of work after claiming, the next section first establishes the prevalence of this behavior.

How Many People Work After Claiming?

To examine Social Security beneficiaries who are still working, our analysis uses the 1992-2022 Health and Retirement Study (HRS), a biennial longitudinal survey with detailed information on Social Security claiming, employment, and income. Most prior work on this issue focuses on a point-in-time snapshot capturing the share of older individuals who have both earnings and Social Security income in any given year.⁹ We also start with this approach, identifying those who reported working at the time of their HRS interview, earned a minimum amount in the past calendar year, and who also indicated that they claimed Social Security retirement benefits prior to the interview.¹⁰

In 2018 (before the pandemic disrupted both work and claiming), 13 percent of individuals ages 62-75 met these criteria for worker-beneficiaries.¹¹ Interestingly, working after claiming is not a new phenomenon – the share was actually a bit higher two decades before. The earnings of these worker-beneficiaries are also not trivial, constituting about 40 percent of their household income on average.

However, point-in-time estimates understate the true prevalence of working after claiming since they include some workers who are not yet beneficiaries but may be eventually, as well as some beneficiaries who are not currently working but did work earlier. Hence, to understand the extent of work after claiming, we next examine lifetime patterns. Specifically, the analysis uses the HRS to track individuals from age 56 – when the vast majority are still in the labor force – to age 75, when most have fully retired.¹² The HRS interviews respondents once every two years, with the first post-claiming interview in our sample typically occuring about one year after respondents have claimed their benefits. Hence, we observe any employment reported in that initial post-claiming interview as well as at two-year intervals thereafter. This longitudinal view shows that working after claiming Social Security retirement benefits is indeed more common over the lifetime – around 40 percent of older individuals report ever working after their claiming date, either because they start claiming before they retire, or because they go back to work after an initial retirement (see Figure 2).¹³

The bottom line is that around 40 percent of older individuals claim their Social Security benefits before fully retiring and this phenomenon is not new.

Who Works After Claiming Retirement Benefits?

Despite the prevalence of working after claiming, little is known about the characteristics or motivations of the workers who do so. To take an initial look at this topic, we first examine when these workers choose to claim. As shown in Figure 3, two-thirds of them claim before the FRA – typically right at age 62 – while another 30 percent claim between the FRA and age 69 – typically right at the FRA.¹⁴ Since very few claim at age 70 (when monthly benefits reach their maximum) or later, the following analysis focuses on those who claim before then.

Among worker-beneficiaries, the timing of claiming probably reflects different characteristics and circumstances. Since the earnings test could discourage significant work activity for early claimants, those who claim before the FRA likely do so because they cannot, or choose not to, continue working at full capacity. In this case, Social Security benefits may provide the income needed to phase into retirement – a common reason cited for early claiming.¹⁵ The motivations of those who claim between the FRA and age 69 and then keep working are more complex. These workers are no longer subject to the earnings test, yet they decide not to delay claiming to 70. Their decisions could reflect social norms around the FRA, a desire to move into transitional bridge employment at that time, or the claiming of Social Security spousal benefits (which unlike worker benefits do not increase after the FRA).¹⁶

To evaluate the hypothesis of two groups of worker-beneficiaries, the analysis next examines their pre-claiming characteristics.¹⁷ As expected, early claimants are less likely to hold college degrees and less likely to have careers in managerial or professional occupations – characteristics that make them less able to work longer in comfortable conditions as well as more financially vulnerable in retirement (see Figure 4). Both groups are relatively healthy as they approach retirement, although early claimants report good health at somewhat lower rates.

Examining employment patterns further supports this story. Worker-beneficiaries who claim before the FRA are mostly working part time – half of all worker-beneficiaries claim before the FRA and work part time, while only 18 percent claim early and work full time (see Figure 5). In contrast, a majority of their counterparts who claim between the FRA and age 69 are working full time. For the early claimants, this pattern is consistent with using Social Security benefits to supplement reduced earnings while gradually transitioning out of the labor force.¹⁸

Additional support comes from looking at earnings and Social Security benefits, in particular how well worker-beneficiaries replace their pre-claiming earnings. Specifically, we compare earnings at age 56 – before most retirement transitions begin – with those observed in the survey wave following initial receipt of Social Security benefits, which typically takes place three years after claiming.¹⁹ Worker-beneficiaries who claim early typically have lower pre-claiming earnings and cannot fully replace what they were earning at age 56. Indeed, median earnings decrease by almost half from $38,700 to $16,500, and Social Security does not fully offset the gap (see Figure 6).²⁰

In contrast, median earnings of those who claim between the FRA and age 69 show a much smaller decline. Moreover, the combination of post-claiming earnings and Social Security benefits exceeds what they were earning before, suggesting that some in this group may have the financial capacity to delay claiming further.

A final question is how long beneficiaries spend working – is it a short-term activity that allows new claimants to ease into retirement, or a longer-term arrangement? Tracking the median earnings of worker-beneficiaries over time shows that, regardless of claiming age, substantial work activities continue until five years after claiming, though at gradually declining levels (see Figure 7). By seven years after claiming, median earnings have fallen to minimal levels, suggesting a transitional behavior, albeit a slow one. That said, since worker-beneficiaries who claim after the FRA typically do so right at age 66, sustained work activity for an additional five years indicates that some could potentially delay claiming until 70.

The overall conclusion is that working after claiming serves different purposes for different groups. Two-thirds of these worker-beneficiaries rely on Social Security to supplement reduced earnings and may have limited capacity to delay claiming, while the remaining third maintain substantial earnings levels for several years, on average, suggesting greater financial flexibility to delay.

Conclusion

Receipt of Social Security benefits is often used as a shorthand to classify an individual as retired. Contrary to this conventional wisdom, working after claiming has long been a path chosen by a significant share of workers, with around 40 percent of individuals ages 62-75 doing so at some point over the past two decades. This brief finds that these worker-beneficiaries fall into two groups.

The first group – 29 percent of all individuals – claim as early as they can and use Social Security to supplement significantly reduced earnings. Policies like raising the FRA may disproportionately harm these workers, who are less likely to hold the types of white-collar jobs that facilitate working longer. In contrast, the remaining 13 percent typically work full-time and see increased total income as a result. While their motivations for claiming remain unclear, they seem to have significant work capacity and could perhaps be nudged to delay claiming to potentially increase their lifetime benefits. Future research should explore what drives their claiming decisions and whether targeted interventions could help them delay. Additionally, since work after claiming typically lasts about five years, future research should examine how this behavior impacts households’ overall retirement security.

References

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Endnotes