Working in retirement is increasingly common — and for many retirees, it's a smart financial and personal decision. Extra income reduces how much you need to withdraw from savings, keeps your mind and body active, and can provide health insurance coverage before Medicare kicks in at 65.

The key variable is whether you've reached your full retirement age (FRA). For those born in 1960 or later, FRA is 67. Before that age, the Social Security earnings test applies: in 2024, if you earn more than $22,320/year while collecting Social Security, $1 is withheld for every $2 you earn above that limit. In the year you reach FRA, the limit increases to $59,520, and the reduction is $1 for every $3 over the limit.

The good news: those withheld benefits aren't lost forever. Once you reach FRA, the SSA recalculates your benefit upward to account for the months it was withheld. You essentially get credited back over time — though it can take years to fully recover depending on how much was withheld.

Taxes are another consideration. Working income adds to your total income for the year. If combined income — wages, Social Security, retirement withdrawals — pushes you above $34,000 (single) or $44,000 (married), up to 85% of your Social Security benefit becomes taxable. Managing this threshold is a key part of retirement tax strategy.

Medicare premiums can also be affected. High earners pay Income-Related Monthly Adjustment Amounts (IRMAA) — surcharges on Medicare Part B and Part D premiums. If your income from working pushes you above certain thresholds, your Medicare costs increase significantly. This is often a surprise for retirees who return to work or take on consulting income.

• ✓You can work in retirement — but earning above the limit before FRA temporarily reduces your Social Security benefit.
• ✓After full retirement age, there is no earnings limit — you keep every dollar of Social Security regardless of income.
• ✓Working income can make up to 85% of your Social Security benefit taxable.
• ✓High income in retirement can trigger Medicare IRMAA surcharges — increasing your premiums significantly.
• ✓Working part-time early in retirement can reduce portfolio withdrawals and extend the life of your savings significantly.

Before Full Retirement Age (before 67 for those born in 1960+): The earnings test applies. In 2024, you can earn up to $22,320 without any impact on your Social Security benefit. Above that, $1 is withheld for every $2 earned over the limit. This can significantly reduce or even eliminate your monthly benefit temporarily.

In the Year You Reach FRA: A higher earnings limit applies — $59,520 in 2024. Above that, $1 is withheld for every $3 earned over the limit, only for the months before your birthday that year.

After Full Retirement Age: The earnings test disappears entirely. You can earn $50,000, $100,000, or more with zero reduction to your Social Security benefit. If you're healthy and enjoy working, this is often the ideal window to take on part-time or consulting work.

Continued contributions: If you're still working and earning, you continue paying into Social Security. If your current earnings are among your top 35 years, this can actually increase your future benefit — the SSA automatically recalculates each year.

• ✗Claiming Social Security early and then earning above the limit — you'll have benefits withheld and create an unnecessary tax situation.
• ✗Not reporting earnings to the SSA — underreporting can lead to overpayments you'll have to repay later.
• ✗Ignoring IRMAA thresholds — a modest income increase can trigger a Medicare premium surcharge of hundreds of dollars per month.
• ✗Not adjusting your tax withholding — working income combined with Social Security and retirement withdrawals can create a large unexpected tax bill.
• ✗Relying on working as your primary retirement backup plan — health issues or job market changes can make late-career employment unreliable.

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