How much could you lose?
Whether or not your Social Security benefits are reduced depends largely on your age and earnings.
If you’re under your full retirement age (FRA) – 67 for those born in 1960 or later – the Social Security Administration (SSA) imposes an earnings test to determine if your income (only wages or net earnings is self-employed) exceeds certain thresholds. For 2025, that threshold is $23,400.
If your income exceeds this limit, the SSA will deduct $1 from your benefits for every $2 you earn above the threshold. For example, earning $30,000 a year would mean you’re $6,600 over the limit, resulting in a $3,300 reduction in your Social Security benefits for the year. That’s an average of $275 less in your monthly check – significant for retirees relying on fixed incomes.
If you reach full retirement age in 2025, they deduct $1 from your benefits for every $3 you earn above $62,160 until the month you reach full retirement age.
But once you reach your FRA, the earnings test disappears. You can work as much as you’d like without facing reductions in your benefits. Even better, the benefits withheld while you worked are not lost; the SSA recalculates your benefits at FRA to account for any amounts withheld, effectively restoring the lost payments. While the cuts are temporary, they can still create financial challenges in the short term.
Discover how a simple decision today could lead to an extra $1.3 million in retirement
Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.
Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.
Read MoreWorking while collecting benefits
Despite the potential reductions, there’s a hidden upside to working in retirement: potentially increasing your long-term Social Security benefits.
Social Security benefits are calculated based on your highest 35 years of earnings. If you return to work and your current income replaces lower-earning years in your record, the SSA will automatically adjust your benefits to reflect the higher earnings.
This adjustment could result in a modest but meaningful increase in your monthly checks, especially if your prior earnings history includes gaps or lower-wage years. For retirees who left the workforce early or earned significantly less earlier in life, unretiring can provide a valuable boost to their long-term benefits.
Is ‘unretiring’ worth it?
The decision to unretire isn’t just about numbers. It’s about balancing the financial, personal, and practical aspects of returning to work.
On the financial side, working provides an obvious benefit: extra income. Whether it’s part-time work to cover daily expenses or a full-time role that adds to your savings, earning additional money can alleviate financial pressures in retirement. For some retirees, it also offers access to employer-sponsored health insurance, potentially reducing out-of-pocket medical expenses.
Beyond the financial perks, working can provide a sense of purpose, structure, and social interaction that many retirees miss. Staying active through work after career retirement can improve mental health, stave off loneliness, and even increase life satisfaction.
But beyond the potential reduction in Social Security benefits, additional income could push you into a higher tax bracket and make your benefits taxable or a bigger part of your benefits taxable. Retirees also risk overcommitting to jobs that take time away from travel, hobbies, or family – the very things they envisioned enjoying during retirement. You may suffer stress on the job, especially if you’re entering a new field, and face a higher risk of injuring yourself if the job is physically demanding.
Earn cash back on what you buy most
Maximize your spending and earn up to 6% cash back on groceries, streaming, gas, and more. Whether it’s everyday purchases or splurges, this card puts money back in your pocket.
Learn moreWeigh your options
If working as a senior is in your plans, or becomes a necessity, it’s essential to plan carefully.
You can delay claiming Social Security benefits until FRA, to get your full benefits and avoid the earnings test, or even delay until age 70, to maximize your benefits. For every year you wait beyond FRA until age 70, your monthly benefits increase by 8%.
Retirees who plan to work should also explore flexible job opportunities. Part-time or freelance work can provide supplemental income while keeping you below the earnings threshold. This allows you to strike a balance between maintaining your Social Security benefits and earning extra money.
This 2 minute move could knock $500/year off your car insurance in 2024
OfficialCarInsurance.com lets you compare quotes from trusted brands, such as Progressive, Allstate and GEICO to make sure you're getting the best deal.
You can switch to a more affordable auto insurance option in 2 minutes by providing some information about yourself and your vehicle and choosing from their tailor-made results. Find offers as low as $29 a month.
