Many Americans nearing or in retirement consider working part-time or continuing their careers while receiving Social Security benefits. Whether for financial reasons, personal fulfillment, or simply staying active, working during retirement can offer many benefits. However, it’s important to understand how continued employment can affect your Social Security income, especially if you haven’t yet reached your full retirement age (FRA). Knowing the rules and how they apply to your situation is essential for maximizing your income and avoiding unexpected reductions.
How Working Affects Your Benefits Before Full Retirement Age
If you choose to receive Social Security benefits before reaching your full retirement age—typically between 66 and 67, depending on your birth year—your benefits may be temporarily reduced if your earnings exceed certain limits. In 2025, the earnings limit is $23,400. If you earn more than that amount, Social Security will withhold $1 in benefits for every $2 you earn over the limit.
The year you reach your full retirement age has a higher threshold. In 2025, for example, you can earn up to $62,160 before your birthday, and only $1 will be withheld for every $3 over that limit. Once you reach your full retirement age, the earnings limit disappears entirely, and you can earn as much as you want without any reduction in your Social Security benefits.
It’s important to note that these reductions are not permanent. Social Security recalculates your benefit once you reach full retirement age to credit you for the months when benefits were withheld due to excess earnings. This means you may receive a higher monthly benefit going forward.
Long-Term Considerations of Working in Retirement
Continuing to work while receiving Social Security benefits can also increase your future payments if your current income is among your highest-earning years. Social Security benefits are calculated based on your 35 highest-earning years, so if you replace a lower-earning year with a higher one from post-retirement work, your benefit amount could increase.
However, there are also potential downsides to consider. Additional income from work could push you into a higher tax bracket or cause more of your Social Security benefits to be taxed. Depending on your total income—including wages, investment income, and Social Security benefits—up to 85% of your Social Security benefits could be subject to federal income tax. Understanding your total tax liability is essential when deciding whether to continue working during retirement.
Working while collecting Social Security also affects Medicare premiums for some retirees. If your income exceeds certain thresholds, you may have to pay higher premiums for Medicare Part B and Part D due to the Income-Related Monthly Adjustment Amount (IRMAA).
Balancing Work and Retirement Income
Ultimately, the decision to work while receiving Social Security benefits comes down to your personal and financial goals. If you enjoy your work and are looking to stay active or increase your income, the benefits can outweigh the temporary reductions in payments. On the other hand, if your goal is to minimize taxes and maximize your Social Security income, it may be worth adjusting your work schedule or delaying benefits until full retirement age or later.
Before making any decisions, it’s important to review your financial plan and consider how your earnings will impact your benefits, taxes, and overall retirement income. A financial advisor can help you create a strategy that fits your lifestyle while maximizing the advantages of working in retirement.
Partner with Safe Harbor Wealth Advisors
Navigating Social Security while continuing to work can be complex, but you don’t have to figure it out alone. At Safe Harbor Wealth Advisors, we help individuals understand how working in retirement affects their benefits and create personalized plans that align with their goals. If you’re thinking about working while receiving Social Security benefits, let us help you build a strategy that works for you. Contact Safe Harbor Wealth Advisors today at (614) 760-0670 or visit our website to schedule your complimentary consultation. We’re here to provide clarity, guidance, and peace of mind as you plan your ideal retirement.