Can I Retire at 62 and Still Work Part-Time?

Many individuals aspire to retire early while still maintaining some level of work. They often consider initiating Social Security benefits at age 62, the earliest possible age, to supplement income from part-time employment. This approach allows for a gradual transition into full retirement, blending personal time with continued financial stability. Understanding how this decision affects Social Security benefits, tax obligations, and healthcare coverage is important for effective planning.

Social Security Benefits at 62

Claiming Social Security retirement benefits at age 62 initiates earlier payments, but with a permanent reduction in the monthly benefit amount. The Social Security Administration determines an individual’s Full Retirement Age (FRA) based on their birth year. For those born in 1960 or later, the FRA is 67. If born between 1943 and 1954, the FRA is 66, with a gradual increase for birth years between 1955 and 1959.

Electing to receive benefits at 62, rather than waiting until FRA, can result in a reduction of up to 30% of the monthly benefit. This permanent reduction means the lower benefit amount continues for the duration of receipt. For instance, if an individual’s full retirement benefit at age 67 would be $2,000 per month, claiming at 62 could reduce it to approximately $1,400 per month.

Impact of Working While Receiving Benefits

Working part-time while receiving Social Security benefits before reaching Full Retirement Age (FRA) can lead to a temporary reduction in benefit payments due to the Social Security earnings limit. For individuals who are under FRA for the entire year, $1 in benefits is deducted for every $2 earned above a specific annual limit. For 2025, this annual earnings limit is $23,400.

In the calendar year an individual reaches their FRA, a different earnings limit applies. For 2025, this limit is $62,160 for earnings in the months before the month of reaching FRA. In this scenario, $1 in benefits is deducted for every $3 earned above this higher limit. Once an individual reaches their FRA, there is no limit on how much they can earn, and their Social Security benefits will no longer be reduced due to earnings.

Any benefits withheld due to exceeding these earnings limits are not permanently lost. When the individual reaches their FRA, their monthly benefit amount is recalculated to account for the previously withheld benefits, potentially leading to a higher monthly payment. The earnings that count toward these limits include wages from employment and net earnings from self-employment, but not other forms of income like pensions, annuities, or investment income.

Tax Considerations

Both Social Security benefits and part-time earned income have tax implications for individuals who retire and work at age 62. Social Security benefits can become taxable at the federal level based on your “combined income” as defined by the IRS. This combined income is calculated by taking your adjusted gross income (AGI), adding any nontaxable interest, and then adding half of your Social Security benefits.

For 2025, if your combined income is between $25,000 and $34,000 for single filers, up to 50% of your Social Security benefits may be subject to federal income tax. If your combined income exceeds $34,000 for single filers, up to 85% of your benefits may be taxed. For those filing jointly, the thresholds are higher; up to 50% of benefits may be taxed if combined income is between $32,000 and $44,000, and up to 85% if it exceeds $44,000.

Part-time wages are subject to federal income tax. These earnings are also subject to Federal Insurance Contributions Act (FICA) taxes. For 2025, employees generally pay 6.2% for Social Security and 1.45% for Medicare, with no income limit for Medicare taxes. Self-employed individuals pay both the employer and employee portions of these taxes, totaling 15.3%. State income taxes may also apply to both part-time wages and, in some states, a portion of Social Security benefits.

Healthcare Coverage

Healthcare coverage is an important consideration for individuals retiring at age 62, as Medicare eligibility generally begins at age 65. This creates a potential three-year gap where alternative health insurance options are necessary. One option is to continue coverage through a former employer’s plan via COBRA. COBRA typically allows continuation of coverage for up to 18 months, but the individual is responsible for the full premium, plus an administrative fee, which can be considerably more expensive than what they paid as an active employee.

Another avenue for healthcare is through the ACA Health Insurance Marketplace. These plans cannot deny coverage based on pre-existing conditions, and individuals may qualify for subsidies to help reduce premium costs, depending on their income. Open enrollment for ACA plans typically occurs annually, but a special enrollment period is often triggered by events like losing employer-sponsored coverage due to retirement. Private health insurance plans can also be purchased directly from insurance companies, though these may offer less financial assistance than Marketplace plans. Some part-time jobs may offer employer-sponsored health benefits, which could be a cost-effective solution if such employment is available and desired.