Should you continue working full-time or look for part-time work for your last job before retirement? Does it make sense to keep working beyond when you initially planned to retire?
If you have options, it may make sense to consider Social Security. The amount you earn during your final working years can influence your total benefit, especially if you have some low-earning years on your record.
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Why your last job can matter to Social Security
The Social Security Administration considers your highest 35 years of indexed earnings to calculate your retirement benefits. If you work at a high-paying job during the final years of your career, that income can replace the income recorded during your lower-earning years. People who have less than 35 years of accumulated work due to unemployment, caregiving or any other reason can add more years to their work experience, which will likely result in higher benefits. Non-working years count as “zeroes.”
Your profession and number of hours are not part of the calculation. Social Security just cares about how much you earned in a given year. However, working an extra year doesn’t guarantee a substantial increase in your benefits.
The workers most likely to benefit from one more job
Anyone who had a career gap or spent multiple years in low-wage work but now has higher earning power will likely benefit the most from working at their current job for a little longer, or finding a new one.
Working an extra few years can also make sense for people who claimed Social Security early and still work. High-earning years still affect your benefits and can result in higher payouts moving forward. Social Security will also withhold a portion of your benefits if you are before retirement age, depending on how much you earn from your job. Those withheld benefits translate into higher lifetime checks when you reach full retirement age, which is 67 if you were born in 1960 and later.
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How to decide whether the job is worth it
If Social Security is the deciding factor, you should start by logging into your my Social Security account and seeing your projected benefit. This account also lets you review your earnings record for missing or low years. This information can lead to an optimal, personalized decision instead of following generic advice that may not apply to your situation.
Someone who has a low-earning year may benefit more from working longer than someone who has already logged 35 steady, high-earning years. But Social Security isn’t the only factor to consider. You should also consider intangible factors such as your health, burnout and job satisfaction. Some people can retire with what they have saved and use Social Security to cover most of their living expenses. Not everyone needs to wait until age 70 to tap into Social Security (though delaying the move until then can mean higher checks).
The last job you have may barely move the needle, depending on your average earnings over your 35 most productive years and how much you are earning from your current job. For others, that extra year can make a larger difference when it comes to making your money last. That’s why it is important to review the numbers before quitting for good.
