Retirement no longer means completely stepping away from work. Many retirees today choose to take on part-time jobs or freelance opportunities, either out of necessity or to stay active and engaged. Some want extra income to cover rising living and healthcare costs, while others enjoy the sense of purpose and social interaction that work provides.
While part-time work in retirement can be rewarding, it also comes with financial considerations—particularly around taxes and Social Security benefits. Understanding how earnings interact with retirement income, healthcare costs, and long-term financial security is essential before making the decision to work after retirement.
Table of Contents
Why Retirees Choose Part-Time Work
- Supplementing Income
- Many retirees find that Social Security and savings alone are insufficient to cover everyday expenses or unexpected bills.
- Rising Costs
- Inflation and increasing healthcare expenses push retirees to seek additional income.
- Delayed Full Retirement
- Some prefer easing into retirement gradually rather than stopping work all at once.
- Mental and Social Engagement
- Work provides structure, purpose, and opportunities for social interaction, which can reduce feelings of isolation.
- Access to Benefits
- Certain part-time jobs still offer limited healthcare or other perks, valuable for retirees not yet on Medicare.
Social Security Rules for Working Retirees
The Social Security Administration allows retirees to earn income while collecting benefits, but earnings may temporarily reduce benefits if taken before full retirement age (FRA).
Full Retirement Age (FRA)
- FRA depends on birth year:
- Born 1943–1954: FRA is 66
- Born 1960 or later: FRA is 67
Earnings Test Before FRA
- If you claim Social Security before FRA and keep working:
- In 2025, you can earn up to $22,320 annually without penalty.
- Beyond this, Social Security withholds $1 for every $2 earned above the limit.
Earnings Test in the Year You Reach FRA
- Higher limit: $59,520 (2025).
- Withholding reduced to $1 for every $3 earned above this threshold.
- Once you reach FRA, withheld benefits are recalculated and added back, meaning you don’t permanently lose the money.
After FRA
- No limits. Retirees can earn as much as they want without reducing Social Security benefits.
Tax Implications of Working in Retirement
Income Taxes on Wages
- Any part-time job income is subject to federal and state income taxes (where applicable).
- Retirees must also pay Social Security and Medicare payroll taxes on earned wages.
Taxation of Social Security Benefits
- Depending on combined income (adjusted gross income + nontaxable interest + half of Social Security benefits), up to 85% of Social Security benefits may be taxable.
- Thresholds:
- Individuals: $25,000–$34,000 (some benefits taxed); above $34,000 (up to 85% taxed).
- Couples filing jointly: $32,000–$44,000 (some benefits taxed); above $44,000 (up to 85% taxed).
Required Minimum Distributions (RMDs)
- If retirees are over 73, they must also consider RMDs from retirement accounts, which add to taxable income and could push them into higher tax brackets.
Impact on Medicare
- Working retirees with higher incomes may face increased Medicare premiums.
- Income-Related Monthly Adjustment Amounts (IRMAA): Higher-income retirees (individuals earning above $103,000 or couples above $206,000 in 2025) pay surcharges on Medicare Part B and Part D.
- Part-time income could push retirees into these higher brackets.
Benefits of Part-Time Work Beyond Money
- Mental Health: Staying active can reduce depression and cognitive decline.
- Social Interaction: Workplaces foster friendships and prevent isolation.
- Skill Utilization: Retirees can continue contributing their expertise.
- Flexible Schedules: Many part-time roles allow retirees to balance income needs with leisure.
Example Scenario
- Retiree A, age 64, starts Social Security early and earns $30,000 from a part-time job.
- Earnings limit: $22,320.
- Excess: $7,680.
- Social Security withholds $3,840 that year.
- Retiree B, age 68, works part-time earning $40,000.
- Since they are past FRA, no reduction in Social Security applies.
- However, earnings combined with Social Security benefits may push more of their benefits into taxable income.
Tips for Retirees Considering Part-Time Work
- Understand the Earnings Test
- If claiming before FRA, calculate how much work income may reduce Social Security benefits.
- Consider Delaying Social Security
- Working longer may allow retirees to delay claiming, resulting in higher lifetime benefits.
- Monitor Tax Brackets
- Extra income could push retirees into higher tax brackets or Medicare surcharges.
- Balance Income with Lifestyle
- Focus on roles that provide satisfaction as well as income, whether consulting, retail, teaching, or seasonal work.
Part-time work in retirement can be both financially and personally rewarding. It provides retirees with a safety net against inflation, helps pay for rising healthcare costs, and creates opportunities for social engagement. However, retirees must navigate Social Security rules, tax implications, and Medicare surcharges to avoid unpleasant surprises.
With careful planning, retirees can strike a balance—earning extra income while preserving the long-term benefits and security they worked decades to build.
Frequently Asked Questions (FAQs)
Q1. Can I work and collect Social Security at the same time?
Yes, but if you claim before full retirement age, benefits may be temporarily reduced depending on earnings.
Q2. Will working part-time increase my Social Security benefits?
If your new earnings are higher than past lower-earning years used in your benefit calculation, your Social Security payments may increase slightly.
Q3. Are Social Security benefits always taxable if I work in retirement?
Not always, but combined income can push you into taxable ranges where up to 85% of benefits are taxed.
Q4. Does part-time work affect Medicare costs?
Yes. Higher earnings may trigger IRMAA surcharges, raising Part B and Part D premiums.
Q5. What’s the best age to work part-time and claim Social Security?
This depends on personal finances. Many choose to delay Social Security until FRA or later while working part-time to maximize lifetime benefits.