The Impact of Working in Retirement on Social Security
Retirement doesn’t always mean the end of work. For many people today, retirement is more flexible than ever. Some want to stay active and social. Others need to supplement their income. And some simply enjoy the sense of purpose a part-time job or side business provides.
But if you plan to work in retirement—or are already doing so—it’s important to understand how earned income can affect one key piece of your financial puzzle: Social Security.
While working in retirement can bring financial and personal benefits, it can also impact how much you receive in Social Security benefits, depending on your age, income, and when you started collecting.
Here’s what you need to know so you can make informed decisions—and avoid surprises.
When You Claim Social Security Matters
One of the most important factors in understanding how work affects Social Security is when you begin receiving benefits:
Full Retirement Age (FRA): This is based on your birth year—typically between 66 and 67. Once you reach FRA, there’s no reduction in benefits if you continue to work.
Before Full Retirement Age: If you claim benefits early (as early as age 62) and continue working, your benefits may be temporarily reduced based on how much you earn.
After Full Retirement Age: If you delay collecting until after FRA, you may receive increased monthly benefits, and your earnings no longer reduce your benefit.
The Earnings Limit: How It Works
If you’re under your full retirement age and collecting Social Security, the Social Security Administration sets an annual earnings limit. In 2025, that limit is $22,320. If you earn more than that from working, your benefits may be reduced.
Here’s how it works:
For every $2 you earn over the limit, $1 is withheld from your Social Security benefits.
In the year you reach full retirement age, a higher limit applies ($59,520 in 2025), and only $1 is withheld for every $3 earned over that threshold—but only for the months before your birthday month.
Once you reach full retirement age, you can earn as much as you want without a reduction in benefits.
This reduction is not a penalty—the money is not lost. Once you reach full retirement age, your monthly benefit will be recalculated to account for the months that benefits were withheld. Over time, you may recover much or all of the withheld amount.
Why Work in Retirement Anyway?
There are many reasons why people choose to work during retirement, including:
Extra income to cover rising living or healthcare costs
Delaying withdrawals from retirement savings
Access to employer benefits like health coverage
Purpose, structure, or social engagement
Building up additional Social Security credits, if you haven’t reached 35 years of earnings yet
Working longer can also increase your future Social Security benefit if your earnings in those years are higher than some of your earlier working years—since Social Security is calculated based on your highest 35 years of earnings.
Strategic Ways to Balance Work and Benefits
If you want to continue working but also maximize your Social Security benefits, here are a few smart strategies:
1. Delay Claiming Until Full Retirement Age or Later
If you can afford to, delaying benefits means you can work without worrying about the earnings limit—and your benefits will be permanently higher.
2. Work Part-Time or Keep Earnings Below the Limit
If you want to claim early, be strategic about how much you earn. Keeping your income below the earnings threshold prevents reductions.
3. Use a Combination of Income Sources
If you’re concerned about the earnings limit, consider drawing income from other sources—like annuities, Roth IRAs, or cash value from life insurance—while delaying Social Security.
4. Monitor Your Benefits
Social Security recalculates your benefits automatically each year to include any additional earnings. Be sure to check your annual statement to track adjustments.
The Role of a Retirement Planner
Understanding how work affects Social Security isn’t always simple—but it’s an important part of retirement planning.
A retirement planner can help you:
Model different claiming ages and work scenarios
Evaluate tax implications
Balance income sources
Create a retirement income plan that supports both flexibility and long-term security
Whether you want to start a business, work seasonally, or take on a consulting role, the right plan ensures that working in retirement enhances your lifestyle instead of creating unintended financial complications.
Make Smart Decisions for Your Retirement Years
At Sound Retirement Solutions, we believe your retirement should be just that—yours. Whether that includes part-time work, full retirement, or something in between, our retirement planners can help you navigate the impact of Social Security and create a plan that fits your goals.
📞 Curious how working might affect your benefits? Schedule a conversation with one of our retirement planners today and feel confident about every decision you make—now and for the future.
