Will I be penalized for working full-time while collecting Social Security if I put benefits in my 401k?

This won't work, unfortunately. The earnings test is based on your wages/self-employment income, not what you do with your Social Security benefits. Contributing to your 401k doesn't change the fact that you're still earning over the limit. SSA looks at your W-2 or self-employment income before any deductions or contributions. If you're 63 and earning over the $22,320 limit in 2025, you'll lose $1 in benefits for every $2 you earn above that threshold, regardless of where you direct your benefit payments.

same boat! turned 62 in January & still working. got hit HARD with the penalty even tho I'm only making like $30k a year teaching part time...they should really update those income limits!!

The previous responses are correct - what matters is what you earn, not what you do with your benefits. But I think it's worth clarifying the details of how this actually works: 1. While working before your Full Retirement Age (FRA), earnings over $22,320 (2025 limit) will cause $1 in benefits to be withheld for every $2 earned above the limit 2. The year you reach FRA, there's a higher limit ($59,520 in 2025) and a lower reduction ($1 for every $3) 3. Once you reach FRA (66+months depending on birth year), there is NO earnings limit whatsoever 4. Most importantly: benefits withheld aren't permanently lost! Your monthly benefit will be recalculated at FRA to credit back the months of withheld benefits So while your 401k strategy won't avoid the reduction, you aren't permanently losing money - you'll get it back via higher monthly payments later.

wait you guys are getting penalized for working?? I'm 66 and collecting & working and nobody said anything to me about penalties???

Your financial advisor should definitely know this! The earnings test isn't affected by what you do with your benefits. However, there IS a tax planning opportunity here. Contributing more to your 401k could lower your overall taxable income, which might help reduce how much of your Social Security is subject to income tax. Up to 85% of your SS benefits can be taxable depending on your "combined income" (AGI + nontaxable interest + half of SS benefits). Don't confuse tax benefits with avoiding the earnings test though - completely different issues.

I was in your EXACT situation last year!!! I tried calling SSA like 50 times to understand this better and NEVER got through!!! So frustrating!!! Eventually I just gave up trying to talk to someone and accepted the penalty. 😡

One thing nobody mentioned - if u make too much they might stop your benefits entirely for some months. Happened to my brother!

Based on your income of $65,000, let's calculate your approximate withholding: 1. 2025 earnings limit: $22,320 2. Amount over limit: $42,680 ($65,000 - $22,320) 3. Reduction: $21,340 ($1 for every $2 over, so $42,680 ÷ 2) If your monthly benefit is around $2,000, for example, this would mean approximately 10-11 months of benefits might be withheld. I'd recommend contacting SSA to verify their exact calculation and when the withholding will occur. You can also look into whether adjusting your work schedule or income might help if possible.

If you're going to lose most of your benefits anyway due to the earnings test, AND you plan to continue working for 3-4 more years, it might actually make more sense to suspend your benefits now and restart them later. By claiming at 67 (your FRA) instead of 63, you'd get approximately 33% more in monthly benefits for the rest of your life. Plus, you'd avoid the hassle of the earnings test completely. You can contact SSA within your first 12 months of entitlement and withdraw your application (Form SSA-521). You'd have to repay benefits received, but then it would be as if you never claimed.

There's no penalty for withdrawing your application within the first 12 months, but you can only do this once in your lifetime. Regarding spousal benefits - if you withdraw your retirement claim, you could potentially file for spousal benefits only, but there are complications: 1. You're subject to deemed filing rules if you're under FRA 2. Spousal benefits would still be reduced for claiming before your FRA 3. Spousal benefits would still be subject to the same earnings test At 63, you'd get approximately 35% of your husband's PIA as a reduced spousal benefit (instead of 50% at your FRA). And with your income level, most or all of these spousal benefits would still be withheld due to the earnings test.