Nearly 1 in 5 U.S. Workers Say AI Replaced Them, Then Their Boss Asked Them Back. At 64, Returning at Higher Pay Could Lift His Social Security Check
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Picture a 64-year-old operations manager who lost his job to an AI system last year. He claimed Social Security early to cover the gap. Now his old boss is calling him back, and the offer pays more than his old salary did.
He’s hypothetical, but the situation isn’t unheard of. Fortune reported on November 9 that 19% of U.S. respondents in an SHL survey said AI had replaced them and their employers later asked them to return. That number covers only the people surveyed, so read it as a snapshot of that group. Even so, a recent Inc. headline summed up the trend: companies want those workers back, and it won’t be cheap.
For someone already collecting benefits, taking a job again cuts two ways. The paycheck can slash his Social Security this year and grow it for life. The outcome depends on how his new earnings compare with the years already used to calculate his benefit.
Why One Strong Year Can Rewrite His Benefit
Social Security bases your retirement benefit on your highest 35 years of earnings, adjusted for wage growth. Every year the agency checks the records of beneficiaries who are still working. If a new year raises the benefit, it pays the increase retroactive to January following the year of earnings.
Higher pay only helps if it beats one of the weaker years already in his top 35, after those years are adjusted for wage growth.
Say he earns $80,000 and that year replaces an adjusted year of $30,000.
Spread the $50,000 difference over the 420 months in 35 years, and his average monthly earnings rise by about $119.
The benefit formula pays out only part of that average. If the increase falls in the 32% tier, that turns $119 into about $38 more per month before accounting for his early claim. His actual increase would be smaller.
Future cost-of-living adjustments (COLAs) would build on the higher benefit. If his new earnings qualify for an increase, that gain would generally be effective in January 2028. It could also bolster an eligible surviving spouse’s benefit.
Where His Paycheck Collides With His Check
At 64, he hasn’t reached full retirement age (FRA), which is 67 for anyone born in 1960 or later. That puts him under the earnings test. In 2027, Social Security holds back $1 for every $2 he earns above $25,560.
On an $80,000 salary, the formula calls for holding back $27,220. Say his check matches the $2,170 average for retired workers after the 2027 increase.
A full year of checks would then total $26,040. The amount held back can’t exceed what he’s owed, so he would get no checks at all that year.
Those withheld months aren’t necessarily lost. At full retirement age, Social Security recalculates his benefit to account for months when payments were withheld, easing his early-claiming cut. This adjustment is separate from the increase based on his new wages. One reflects additional earnings; the other credits months without benefits.
How the Raise Ripples Into Taxes and Savings
In years when he receives Social Security alongside his salary, taxes can come into play. The IRS adds half his benefits to his other income to determine how much of those payments may be taxable. With an $80,000 salary, up to 85% of any benefits he actually receives could be included in taxable income. But if Social Security withholds every check for the year, there may be no benefits to tax.
The bigger opportunity may be in his savings. If his paycheck covers his bills, he can leave his retirement accounts untouched, giving them more time to grow while his earnings record improves.
Decisions Worth Making Before He Says Yes
First, plan for the cash crunch. If the earnings test stops his checks, he lives on his salary alone. He should tell Social Security his expected earnings up front, so he doesn’t get an overpayment bill later. That mistake is the hardest to undo. (Returning to work after claiming comes with a few of tax traps beyond this one, and we mapped them in a free semi-retirement guide.)
Second, he should pull his earnings record from his online benefits account and find his weakest years. If several fall well below $80,000, each year back at work could replace one of them. He’d get a bigger paycheck now and a slightly bigger check for life.
Earnings histories, claiming dates and household finances all differ. A careful look at his own record will tell him more than any rule of thumb.
Contact [email protected] for any questions or corrections.
Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
