Can You Collect Retirement and Still Work?

It is generally possible to continue working while simultaneously receiving retirement benefits. The ability to do so, and the specific rules that apply, depend significantly on the type of retirement benefit being collected and the amount of income earned from continued employment. Understanding these nuances is important for making informed decisions about your financial future.

Working While Receiving Social Security Benefits

Working while receiving Social Security benefits is permissible, but earning a certain amount of income can temporarily reduce your benefit payments if you are below your Full Retirement Age (FRA). Your Full Retirement Age is the age at which you become eligible to receive 100% of your Social Security benefits, and it varies based on your birth year, ranging from 66 to 67. If you claim benefits before reaching your FRA and continue to work, your benefits may be subject to an earnings test.

For individuals who are under their Full Retirement Age for the entire year, the Social Security Administration (SSA) will deduct $1 from your benefits for every $2 you earn above an annual earnings limit. In 2025, this limit is $23,400. For example, if you earn $25,400, which is $2,000 over the limit, your benefits would be reduced by $1,000 ($2,000 / 2).

A different earnings limit applies in the calendar year you reach your Full Retirement Age. In 2025, the earnings limit for the months before you reach FRA is $62,160. In this year, the SSA deducts $1 from your benefits for every $3 you earn above this higher limit, but only earnings before the month you attain your FRA count towards this calculation. Once you reach your Full Retirement Age, there is no longer any limit on how much you can earn, and your Social Security benefits will not be reduced regardless of your work income.

The SSA annually reviews the earnings records of all beneficiaries and will recalculate your benefit amount if additional earnings in a previous year qualify you for an increase. If your benefits were reduced due to earning over the limit before your FRA, the SSA will factor those withheld benefits back into your payment amount once you reach your FRA, increasing your monthly payment. Continuing to work and pay Social Security taxes can also potentially increase your future benefit amount, as the SSA will include these higher earnings in their calculation if they replace lower-earning years in your work history.

Working While Receiving Pension or Annuity Payments

The ability to work while receiving pension or annuity payments largely depends on the specific terms of the pension plan or annuity contract. Unlike Social Security, there are no universal government-mandated earnings limits that apply to private or public sector pensions based on continued employment. Each pension plan has its own set of rules regarding re-employment, particularly if you return to work for the same employer or within the same industry. Some defined benefit pension plans may contain clauses that could lead to the suspension or reduction of payments if a retiree returns to work for the original employer, especially in a full-time capacity.

These “suspension of benefits” clauses are often designed to prevent individuals from collecting a pension while simultaneously earning a full salary from the same company that provided the pension. For example, a plan might state that benefits will be suspended if you return to work for the plan sponsor within a certain period or if your re-employment exceeds a specified number of hours. Other pension plans, however, may permit you to collect your full pension regardless of your employment status or who your employer is. Returning to work for a different employer typically does not affect pension payments from a previous employer’s plan.

Annuity payments, which are typically contracts with insurance companies, generally provide income regardless of your work status. Once an annuity contract begins making payments, whether immediate or deferred, those payments are usually guaranteed for a specified period or for life, irrespective of any earned income from employment. However, it is always advisable to review the specific annuity contract or consult with the annuity provider to understand any rare exceptions or specific clauses that might apply.

Working While Taking Distributions from 401(k)s and IRAs

Taking distributions from 401(k)s and Individual Retirement Accounts (IRAs) while still working generally offers more flexibility compared to Social Security or some pension plans. For most individuals, there are typically no earnings limits or work-related restrictions on taking distributions from these accounts once you reach age 59½. At this age, withdrawals from traditional 401(k)s and IRAs are subject to ordinary income tax but are generally not subject to the 10% early withdrawal penalty that applies to distributions taken before age 59½.

A significant consideration when working past traditional retirement age involves Required Minimum Distributions (RMDs). Under the SECURE 2.0 Act, the age at which RMDs must begin has increased to 73. This means that individuals must start withdrawing a minimum amount from their traditional 401(k)s and IRAs by April 1 of the year following the year they turn 73. However, an exception exists for 401(k)s from your current employer’s plan.

If you are still employed by the company sponsoring your 401(k) plan, and you do not own more than 5% of that company, you may be able to delay taking RMDs from that specific 401(k) account until you actually retire. This “still working” exception applies only to your current employer’s plan; RMDs from IRAs and 401(k)s from previous employers are still required once you reach the RMD age, regardless of your current work status. Furthermore, while working, you can generally continue to contribute to both 401(k)s and IRAs, provided you have earned income, potentially allowing your retirement savings to grow further.

Tax Implications of Working in Retirement

Continuing to work in retirement introduces various tax implications, affecting both your earned income and your retirement benefits. Income earned from employment is subject to federal income tax, and potentially state income tax, just as it was during your pre-retirement working years. This earned income is also subject to payroll taxes, specifically Social Security and Medicare taxes, regardless of your age or whether you are already receiving Social Security benefits.

A significant aspect of working in retirement is how earned income can impact the taxation of your Social Security benefits. A portion of your Social Security benefits can become taxable if your “provisional income” exceeds certain thresholds. Provisional income is calculated by adding your adjusted gross income, any tax-exempt interest, and half of your Social Security benefits. Depending on your filing status and provisional income level, up to 50% or even 85% of your Social Security benefits could be subject to federal income tax.

Pension payments and distributions from traditional 401(k)s and IRAs are generally taxed as ordinary income in the year they are received. If you made after-tax contributions to a pension or 401(k), a portion of those payments may be tax-free, but the earnings and pre-tax contributions are fully taxable. Having additional earned income from work, combined with these taxable retirement distributions, can increase your overall taxable income. This higher income may push you into a higher marginal tax bracket, leading to a larger portion of all your income sources being taxed at a higher rate.