How Much Will Working One More Year Impact PERS and Social Security Retirement Income?
If you’re nearing retirement as a Mississippi PERS member, one of the biggest questions is simple: does working one more year actually make a meaningful difference in my retirement income? The answer is usually yes - but how much depends on your salary, your years of service, and when you plan to claim Social Security.
In this post, you’ll see how one additional year can affect both your PERS pension and your Social Security benefits. The key is that these two income sources work together, not separately.
Why You Can’t Evaluate PERS and Social Security Separately
For Mississippi PERS members covered by Social Security, retirement income usually comes from two lifetime benefits: your PERS pension and your Social Security benefit. Your pension is based on years of credited service and average compensation, while Social Security is based on your indexed lifetime earnings and the age you claim.
That means working one more year can change both benefits at the same time.
If you only calculate the pension increase, you may underestimate the full value of staying employed. If you only look at Social Security, you may miss the way your PERS benefit grows with additional service and pay. The right way to think about this is as combined retirement income.
To help Mississippi PERS members with this exercise of determining what the total increase in retirement income would be from PERS and Social Security if they worked one more year, we created a model that calculated that increase across various salaries, years of service, and social security claiming ages.
The assumptions behind our model
To keep the comparison consistent, the analysis used several baseline assumptions:
The member was hired before July 1, 2011
The member elects the maximum retirement allowance option
PERS average compensation is capped at the 2023 IRS limit of $330,000
Social Security earnings are capped at the 2026 limit of $184,500
The retiree is born in 1960 or later and their full retirement age is 67
Years of PERS service credit were assumed to match years of Social Security work history
Working one more year is done at the same salary as the year before (no final year raise)
PERS average compensation on a monthly basis equals social security average indexed monthly earnings
The goal was to isolate the effect of working one more year.
What Happens to Retirement Income When You Work One More Year and Claim Social Security at Full Retirement Age?
If you plan to claim Social Security at full retirement age of 67, working one more year increases total retirement income across every salary.
Annual Increase in Total Retirement Income from PERS and Social Security by Working 1 More Year at Various Years of Service and Salaries and Claiming Social Security at 67
Monthly Increase in Total Retirement Income from PERS and Social Security by Working 1 More Year at Various Years of Service and Salaries and Claiming Social Security at 67
At earlier career stages, you get a retirement boost from both systems. Your PERS pension rises because you have an extra year of service at the same high four average compensation. Your Social Security benefit also generally increases because another year of earnings can replace a lower-earning year in your record or strengthen your average earnings.
For example, a member earning $100,000 with 25 years of service would see an increase of $3,414 per year, or about $285 per month, by working one more year and retiring after 26 years of service.
Another example, a member earning $250,000 with 35 years of service would see an increase of $6,250 per year, or about $521 per month, by working one more year and retiring after 36 years of service.
That is not a small difference. Over time, even a few hundred dollars per month can materially change your retirement income when you factor in cost-of-living-adjustments.
Why the increase changes as you get closer to retirement
As you move later in your career, PERS benefits tend to accelerate more quickly because each additional year of service has a bigger effect on the pension calculation (2.5% vs 2.0% rate over 25 for Tier 1-3). Social Security, on the other hand, is limited by your highest 35 years of indexed earnings and the marginal benefit declines as your indexed earnings increase.
That creates two important thresholds you should be aware of:
Social Security retirement income growth stops in a given year once you reach the earnings cap ($184,500 in 2026)
PERS retirement income growth stops in a given year once you reach the earnings cap ($360,000 in 2026)
Once you move beyond those thresholds, working one more year still matters, but the increase becomes more predictable. At that point, the additional value comes mainly from your service credit and the pension formula, rather than from higher salary-driven gains.
What this means for you
If you are still below the cap ranges, one more year can do more than you might expect. If you are already near or above them, the benefit may still be meaningful - but it will likely be more modest and more stable year to year.
Why Claiming Social Security Early Reduces the Value of Working Another Year
If you claim Social Security at age 62, you accept a permanent reduction of about 30% in your benefit. That lower starting point affects the value of your total retirement income.
In the model, this meant the retirement income increase from working one extra year was smaller than it was compared to claiming at full retirement age.
Annual Increase in Total Retirement Income from PERS and Social Security by Working 1 More Year at Various Years of Service and Salaries and Claiming Social Security at 62
Monthly Increase in Total Retirement Income from PERS and Social Security by Working 1 More Year at Various Years of Service and Salaries and Claiming Social Security at 62
Using the same $100,000 salary example, moving from 25 to 26 years of service increased total retirement income by $3,140 per year, or about $262 per month, when claiming Social Security at age 62. That is still a meaningful gain, but it is lower than the $3,414 annual increase at full retirement age.
The reason is straightforward: when Social Security benefits are reduced, the benefit added by one more year of work is also reduced. Your PERS pension may still increase normally, but the Social Security side of the equation is increasing at a smaller amount.
When claiming Social Security early might still make sense
This does not mean claiming Social Security early is always wrong. It means you need to know the tradeoff.
Early Social Security may fit if:
You need income sooner
You expect a shorter retirement horizon
You are comparing the benefit of working longer against a stronger non-financial need to retire
Still, if your main question is, “How much more money do I get by staying one more year?” the answer will usually be lower when Social Security begins at 62.
Why Delaying Social Security Until 70 Can Make Working One More Year More Valuable
On the other end of the spectrum, delaying Social Security until age 70 increases your benefit through delayed retirement credits. In the model, working one more year later in your career and claiming social security at 70 had a larger impact on total retirement income for a given year of service.
Annual Increase in Total Retirement Income from PERS and Social Security by Working 1 More Year at Various Years of Service and Salaries and Claiming Social Security at 70
Monthly Increase in Total Retirement Income from PERS and Social Security by Working 1 More Year at Various Years of Service and Salaries and Claiming Social Security at 70
Using the same $100,000 salary example, the increase from working 25 to 26 years of service was $3,634 per year, or about $303 per month, when Social Security was delayed until 70. That is higher than the gain at full retirement age and higher than the gain when claiming at 62.
Why? Because delaying Social Security raises the monthly benefit you will eventually receive, so each year of additional earnings benefits from the increased delayed credits. If you are already leaning toward a later claiming age, staying one more year can help on both fronts:
It adds another year of service to your PERS pension
It supports a higher Social Security benefit later on
The biggest takeaway from claiming at 70 strategy
If your goal is maximizing lifetime monthly income, delaying Social Security can amplify the benefit of staying employed longer. That does not mean everyone should wait until 70. But it does mean that the “extra year” decision is more valuable when paired with a later claiming strategy.
What Happens When You Reach the Salary or Service Caps?
One pattern in the model that may not be obvious is this: once you hit certain limits, the extra value of working one more year becomes flat.
For example, when Social Security and PERS earnings limits have been met, the increase in retirement income from working one more year is driven entirely by the PERS pension. In that scenario, the model showed the same flat increase of $8,250 per year, regardless of salary above the PERS earnings limit.
If you are already at the top end of the Social Security or PERS earnings limits or nearing Social Security’s 35 year max, one more year may still be worth it - but not because your salary is dramatically changing the outcome. It is worth it because the PERS pension formula still rewards another year of service.
This is where many people get tripped up. They assume higher pay automatically means a much bigger retirement jump. In reality, once you are near the PERS and Social Security earnings limits, the increase can become flat and a much smaller annual increase percentage wise compared to lower years of service or salary levels.
Why this matters for late-career PERS members
If you are within a few years of retirement, you should not ask only, “How much would my total retirement income be if I retired today?” You should also ask:
How much more pension would I earn with one more year?
Would another year replace a lower-earning year in Social Security?
Am I near a cap where the gain becomes fixed?
Those questions give you a much clearer answer than simply blindly choosing to retire or choosing to work one more year because you think it will help.
What You Should Do Before Deciding to Work One More Year
1. Review your PERS statement
Look at your official PERS annual member statement and confirm:
Credited years of service
High-four average compensation
Membership tier
Estimated maximum retirement allowance
This gives you the PERS pension side of the picture.
2. Review your Social Security earnings record
Log in to your My Social Security account at SSA.gov and check:
Earnings history
Estimated benefit at 62, 67, and 70
Number of work years to get to 35
This gives you the Social Security side of the picture.
3. Combine retirement income
Once you have both estimates, combine them and then compare the total annual and monthly income under different PERS retirement ages and Social Security claiming ages.
The key is to model the two systems together, not separately. That is the only way to see the true value of one more year of work.
Frequently Asked Questions
How much does working one more year increase PERS retirement?
It depends on your salary, years of service, and when you were hired into PERS originally. In our model, a PERS member making $100,000 with 25 of service that was hired originally prior to July 1, 2011 that plans to claim social security at 67 (full retirement age), will see an an increase of $3,414 by working one more year. The increase in the PERS pension itself would be $2,500 of the $3,414 increase.
Does working one more year always increase Social Security too?
Not always by the same amount, but additional earnings can increase your Social Security benefit if they replace a lower year in your indexed earnings record. The size of the increase depends on your work history and claiming age.
Is it better to claim Social Security at 62, 67, or 70?
There is no single best age for everyone. Claiming at 62 gives you income sooner but at a permanent reduction, 67 gives you your full retirement amount, and 70 increases your benefit through delayed credits.
What if my salary is above the PERS or Social Security earnings limits?
Once you reach those limits, working one more year may still help, but the increase is often smaller and in some cases the same amount regardless of how high your salary is. In that case, the benefit comes more from added service than from higher pay.
Can I use a retirement calculator to estimate both my benefits?
Yes, using both the online PERS and Social Security calculators will help you estimate your combined income in retirement. However, a custom model is the most useful. It can use actual earnings history to show how your pension and Social Security work together based on your unique circumstances and career opportunities.
Final Thoughts
Working one more year will always result in an increase in retirement income for PERS members. However, the amount of that increase will depend on your years of service credit, your earnings history, and your social security claiming age.
Disclaimer: This post is for educational and informational purposes only and is not to be construed as personal financial, investment, tax, or legal advice. We cannot guarantee the accuracy in the future as federal and state laws change. Always consult a professional for personal advice specific to your situation.
