How Working in Retirement Affects Social Security Benefits

You might have a sizeable retirement fund already. Or maybe you’re still working on your retirement plan and considering when you could afford to retire.

Either way, Social Security retirement benefits will likely be fundamental to your retirement income. Yet, you may be concerned that your Social Security retirement benefit payments may not be enough to help you live comfortably until the end of your life. After all, the Social Security Administration (SSA) projects the retirement trust fund can only pay full benefits until 2033.

The good news is that you can supplement your income by working while you collect Social Security retirement benefits. But in some cases, the SSA may reduce your benefits.

Learn how work may affect retirees’ Social Security retirement benefits in this article. A lawyer near you can also give you detailed advice and help answer questions about how to protect your benefits.

Start by Estimating Your Social Security Retirement Benefits

Social Security payroll taxes partly determine Social Security retirement eligibility. The Social Security taxes you’ve paid earn you “credits” toward retirement benefits. Your Social Security statement can tell you how many credits you’ve earned and the benefits you may receive.

The SSA calculates benefits by considering your covered earnings (earnings subject to Social Security taxation) and your birth year. It references your 35 highest-earning years before the age at which you claim benefits. Self-employed workers must report their earnings records to the IRS and the SSA for annual credit calculations.

A taxpayer may claim Social Security retirement benefits early at age 62. But claiming retirement benefits early will result in a reduced amount than had you waited until full retirement age (FRA). You’re entitled to 100% of your benefits at full retirement age.

Another factor to consider is that family members may qualify for monetary and other benefits through your work record. For instance, your spouse (and you) may be eligible for Medicare, which usually starts when people reach 65.

Will I Lose My Social Security Benefits if I Work?

Working during retirement will not automatically disqualify you from Social Security benefits. It is still possible to collect Social Security benefits while earning income through employment.

Regardless of your employment status, the SSA will view you as officially “retired” once you file to claim retirement benefits. Even if you work, your eligibility won’t be canceled, and any current monthly benefits won’t suddenly stop completely.

You might want to work full time, or maybe you’re planning to pick up freelance projects on the side. In either case, you’ll have to consider what could happen to your benefits in your specific situation. Your income and age will determine whether your benefits would change.

How Will the Extra Income Affect My Benefits?

If you work after collecting your full Social Security benefit at your full retirement age or later, you may keep all your monthly benefits. This is true no matter how much you earn. But, if you haven’t reached your FRA and work while collecting Social Security checks, the SSA may decrease your Social Security benefits if you earn over a certain amount.

But performing work before full retirement age may not reduce the total value of your lifetime benefits. At full retirement age, the SSA will recalculate your benefits. It will credit you for reduced or withheld benefits due to earnings over the limit. Also, the SSA will increase your benefit if higher wages raise your benefit amount.

Suppose you are a spouse or survivor with minor children or children with disabilities in your care. If you work and have benefits withheld, you will not receive increased benefits at full retirement age.

Different rules may apply if you work or plan to work outside the country. Special rules may also apply if you are a disability benefits beneficiary. This means you receive Social Security disability benefits from either the Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) programs. Working can affect disability benefits. In these situations, you have to report all earnings to the SSA.

How Much Can I Earn and Still Get Social Security Benefits?

The SSA sets two income limits based on the beneficiary’s age relative to their full retirement age. This rule allows you to collect a higher portion of your benefits as you get closer to your FRA. Note that the dollar amount of the annual earnings limit can change because the SSA recalculates it each year.

The SSA reduces benefits as follows:

• Early retirement: The SSA will reduce your benefits by $1 for every $2 earned over the annual limit. In 2026, this yearly earnings limit is $24,480.
• The year you’ll reach FRA: The SSA will reduce your benefits by $1 for every $3 earned above the annual limit. In 2026, this yearly earnings limit is $65,160.
• After your FRA: There is no earnings limit once you reach your FRA, so there is no benefit reduction.

In the year you’ll reach your FRA, this reduction will only consider what you’ve earned until the month before you reach your full retirement age. At that point, your earnings will not count toward the limit and won’t lower your Social Security checks. So if you earned less than the limit before your birthday, it’s possible you wouldn’t have any benefit reduction during that year. But if you already earned more than the limit and your monthly benefits were reduced before your birthday, they would increase again for the rest of the year.

The SSA offers an earnings test calculator to see how your earnings may affect your benefit amounts.

What the SSA Considers Part of Your Earned Income

If you work for an employer, the SSA counts only your wages toward the earning limit. This income is counted when it’s earned, not when it’s paid. If you are self-employed, SSA counts only your net earnings.

The SSA generally does not count other income in retirement, such as:

• Government benefits, such as veteran’s benefits or housing assistance
• Investment earnings in retirement accounts, such as an IRA
• Interest and dividends
• Annuities
• Pension plan payouts
• Capital gains

The SSA does count pension or retirement plan contributions if they are included in the person’s gross wages.

Do I Have To Pay Income Taxes on Social Security Benefits?

Your Social Security retirement benefits may be subject to federal income taxes if you have high, taxable combined income. A few states may also impose state taxes on benefits.

Combined income includes the following:

• 50% of your total retirement benefit amount for the year
• Your adjusted gross income (AGI), which accounts for the money you earn by working
• Any tax-exempt interest

To avoid a large tax bill, you can have the SSA withhold federal taxes from your retirement benefits. You can also consult with a local tax attorney to get tax planning advice.

Ask a Lawyer How Your Work Will Affect Your Benefits

It’s essential to understand how Social Security rules may affect your retirement plan. If you think you might have to work during retirement, whether part-time or for the entire year, you may benefit from speaking with a Social Security attorney in your area. A Social Security lawyer can help you understand how possible monthly earnings during retirement may impact your future benefits.