Navigating Social Security and Common Retirement Misconceptions in 2025
Retirement is filled with big decisions, and understanding how Social Security works while continuing to work—or navigating common misconceptions about retirement—can make a significant difference in your financial future. Let me walk you through some key insights and strategies to help you make informed decisions.
Collecting Social Security While Working
Yes, you can collect Social Security benefits while working, but there are some important rules and limitations to keep in mind. In 2025, the earnings limit is $23,400 for those under full retirement age (FRA). If you earn more than this threshold, Social Security will withhold $1 for every $2 earned above the limit.
It’s essential to know that only wages count toward this calculation—dividends, pensions, and rental income are excluded. Additionally, spousal income does not factor into the earnings limit for the individual collecting benefits.
If you reach full retirement age in 2025, the earnings limit rises to $62,160, and the withholding amount changes to $1 for every $3 earned above the threshold. Earnings prior to starting benefits don’t count toward the limit, so timing is critical if you’re considering collecting while still working.
Reporting Earnings to Social Security
When you apply for Social Security benefits, you’ll need to estimate your earnings for the year. Based on this estimate, Social Security adjusts your benefits and withholds the appropriate amount if necessary. At the end of the year, your actual earnings are verified, and adjustments are made. If you underreport your income, you might need to repay the excess benefits.
Options if You Return to Work After Collecting Benefits
Plans can change, and if you decide to return to work after starting to collect Social Security, you have two main options:
- Withdraw Benefits: If you’ve been collecting benefits for less than 12 months and are under FRA, you can withdraw your benefits and repay what you’ve received. This effectively “resets” your benefits.
- Suspend Benefits: If you’re at FRA or older, you can suspend your benefits without repayment. Your benefits will increase by 8% per year until you resume them.
Recalibration of Benefits After Withholding
If your benefits were withheld because you exceeded the earnings limit, Social Security recalibrates them when you reach FRA. This recalibration adjusts your benefit amount to account for the months withheld, effectively reducing the penalty for early collection. The result is a higher monthly benefit going forward.
Common Misconceptions About Retirement
Planning for retirement isn’t just about finances—it’s also about avoiding common pitfalls. Here are five misconceptions to keep in mind:
- Relying on Two Incomes Forever If one spouse passes away, the surviving spouse often faces a significant income shortfall. It’s essential to plan for this possibility with life insurance or other income sources.
- The Stock Market as the Biggest Risk Many retirees fear the stock market, but over the long term, it has historically outperformed “safe” investments like Treasury bills. Proper diversification can help mitigate risk while still allowing for growth.
- Ignoring Inflation Inflation is one of the biggest threats to a secure retirement. Even a modest 3% inflation rate can significantly erode purchasing power over a 30-year retirement. Growth-oriented investments are essential to keep up with rising costs.
- Considering the Home as a Retirement Asset Unless you plan to sell or monetize your home, it doesn’t generate income and can even become a liability due to maintenance and property taxes. View your home as a place to live, not your primary financial cushion.
- Loving Not Having a Job While the freedom from work can be exhilarating, retirees often find they miss structure and purpose. Having a plan for how to use your time meaningfully—whether through hobbies, volunteering, or part-time work—is crucial for a fulfilling retirement.
Final Thoughts
Whether you’re navigating Social Security rules while working or challenging long-held assumptions about retirement, the key is thoughtful planning. Retirement isn’t a one-size-fits-all journey—it’s about aligning your financial strategies with your goals and priorities.
You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.
Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.
