American workers transitioning from employment to retirement and Social Security benefits typically have several financial concerns.
Personal finance author and radio host Dave Ramsey explains one option people have that can make the big lifestyle change less jarring for some.
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Because Social Security benefits on their own are usually not enough to live on comfortably, people worry about whether their retirement savings and investments — often in in 401(k)s and IRAs — are of sufficient value to cover their financial needs.
The cost of health care is another major concern. People are eligible to enroll in Medicare at age 65, but the program does not cover all health expenses. Non-medical long term care, which includes daily activities such as bathing, dressing and eating, is one example of coverage for which a retiree needs to purchase their own insurance independently.
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Short-term hospital stays and hospice care, by contrast, are covered by Medicare.
People preparing to retire are also often nervous about the lifestyle changes that accompany the transition from full-time work to a new daily routine. They look for ways to stay active, socially connected and engaged.
Ramsey provides some insight into one approach to dealing with these changes that works for some people: continuing to work while collecting Social Security benefits.
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Dave Ramsey clarifies how work affects Social Security
Some people who reach the age where they can collect Social Security opt to do so while continuing to work.
This can be done beginning at 62 years of age, but it involves a reduction in benefits of one dollar for every two dollars earned over a set annual household income, Ramsey explains. In 2024, that set amount was $22,320.
But those reduced benefits aren’t completely gone. The government withholds them until a person reaches full retirement age, which for most people is age 67.
Then, the recipient gets a larger monthly paycheck that makes up for the previously received deduction.
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“Keep in mind that not all income counts toward your limit, only earnings from work,” Ramsey explained. “Income from other government or military retirement benefits, investment earnings, interest, pensions, annuities and capital gains, for example, aren’t counted against your limit.”
At full retirement age, Americans can continue to work if they choose to do so — and receive full Social Security benefits while they are it.
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Ramsey explains a blunt truth about waiting to receive Social Security
Ramsey acknowledges that monthly Social Security benefits are larger the longer a person waits to claim them. The maximum payment possible is available when a person waits until they are 70.Â
But the personal finance coach points out a blunt fact about holding out that long.
“While waiting until you’re 70 to start receiving retirement benefits does mean a larger monthly benefit, it also means less time receiving a monthly payment,” Ramsey wrote. “Depending on when you pass away, you could have ended up with more Social Security payments throughout your retirement if you had taken them earlier.”
Ramsey believes that health is an important consideration when considering when to claim Social Security benefits.Â
If a person has or expects to have high costs related to their health, the financial support Social Security offers gives them and their family the best chance to maximize their benefits while they are alive.
If someone expects to rely on Social Security benefits for daily expenses and they are in good health, Ramsey believes they should consider waiting to claim them.
“Remember, Social Security is like the dessert to your main course — it’s the added bonus, not your complete retirement plan,” Ramsey wrote. “If you still have debt or are living without a fully funded emergency fund, taking your benefits early is not the way to go.”
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