If you’re nearing retirement age, you probably have Social Security benefits on your mind. You’ve worked all your adult life, and cashing into eligible Social Security benefits is your right. But, if you plan to continue to work in retirement, you might wonder how this will impact your benefits.
The quick answer is that you can work during retirement and still receive Social Security benefits. However, doing so can temporarily reduce your benefits.
Keep reading for a complete rundown on everything you should know about how working in retirement will affect your Social Security benefits.
Why Do Some People Work in Retirement?
Most people imagine retirement as quiet days spent reading on their front porches, doing hobbies, and gardening. But that’s not the case for everyone. Many people have to continue working once they reach retirement age. For some, it’s a choice made because they truly enjoy working.
And for others, it’s done out of necessity. A 2018 study found that 51% of Americans believe they might run out of money when they stop working. For various reasons, some can’t financially prepare for retirement like they should, so continuing to work is the only option.
How Working in Retirement Impacts Your Social Security Benefits
As stated above, you can continue to work in retirement and still receive your Social Security benefits. However, those benefits might temporarily be reduced, depending on your age. There are also possible implications for your taxes, spouse’s benefits, and earning potential.
Under Full Retirement Age: Reduced Benefits
You can receive full Social Security benefits in the United States when you reach full retirement age (FTA). Full retirement age is defined as:
- Born between 1943-1954: FTA at 66
- Born between 1955-1959: FTA increases gradually from 66 years and 2 months to 66 years and 10 months
- Born 1960 and later: FTA at 67
If you collect benefits (while continuing to work) before you reach full retirement age, the SSA will deduct $1 from your benefits for every $2 you earn over the annual limit. In 2025, the yearly limit is $23,400. So, if you earn $65,000 at your job, the Social Security Administration (SSA) will deduct $20,800 from your Social Security benefits.
At Full Retirement Age: Full Benefits
If you wait to take advantage and claim Social Security benefits until you’re FTA and you’re still working, there is no limit to how much you can earn, and your benefits won’t be reduced.
Sort of. The timeline is a bit complicated.
In the year of your full retirement age, $1 in benefits is deducted for every $3 you earn. However, the limit is much higher (as of 2025, the limit is $62,160). On the birthday month of your FRA, there are no longer any deductions from your benefits. You’ll receive your full amount whether you’re working or not.
So, if your birthday is in April, you’ll have the above-mentioned deduction from January to March. In April, the deductions will stop.
The good news is that these reductions in benefits are temporary. When you officially reach full retirement age, the SSA will recalculate your benefits and credit you for all the months your benefits were previously reduced. This means that the delayed benefits now only lead to boosted future benefits.
Taxes
Of course, working in retirement doesn’t exclude you from taxes. You’ll need to note:
- While you’re working, your employer will automatically deduct the Social Security portion of the Federal Insurance Contributions Act (FICA) tax from your earnings.
- If you earn above a certain income threshold, your retirement benefits will be taxed as income. So, this means working in retirement can potentially increase your tax liability.
- If your income is between $25,000 and $34,000, you’ll pay income taxes of up to 50% on your benefits. If you earn over $34,000, you’ll pay income taxes on up to 85% of your benefits.
Earnings Potential
Another consideration for working in retirement is its impact on your earnings potential for Social Security benefits. As a reminder, your social security is based on the 35 years of highest income. Working in retirement can add to or boost your earnings from years when you didn’t work or earned little.
Even if you’re already collecting Social Security benefits, the SSA will recalculate them if this most recent year was one of your highest 35 years of work.
Spousal Benefits
Some spouses can collect Social Security benefits based on their partner’s work history. Working during retirement can impact your spouse’s benefits in two possible ways:
- Con: Social Security benefits are taxed based on combined income. So, working in retirement can increase your total combined income and the taxes your spouse pays on their benefits.
- Pro: If your retirement work is adding to your top 35 years of income, it could raise not only your Social Security benefits but also your spouse’s.
The Final Decision
Working in retirement doesn’t mean you’ll be missing out on your Social Security benefits entirely. But it does come with some potential consequences. In the best case scenario, you’re increasing the average income earned across your top 35 years, increasing your benefits. In the worst case, your benefits will be temporarily reduced and taxed at high levels.
Ultimately, only you can know if working in retirement is worth it. It’s best to run a few scenarios to fully understand the full impact on your finances. If you enjoy working or don’t have enough savings to retire yet, working in retirement is usually the right choice. But, the last thing you want to do is to choose to work without realizing what will happen to your benefits.
A good place to start is by estimating your benefits using the SSA’s Retirement Earnings Test Calculator.
You might also be interested in: The Best Strategy for Claiming Social Security Benefits
