Can You Retire and Still Work Full Time?

Working retirement describes the trend of individuals continuing full-time employment after becoming eligible for traditional retirement benefits. This path allows many to maintain engagement, purpose, and financial stability during later life stages.

Defining the Path to Working Retirement

Working retirement means an individual continues full-time employment beyond traditional retirement age. This involves maintaining an active work schedule past reaching full retirement age for Social Security or pension vesting. It signifies a sustained commitment to one’s career or a new full-time role.

This path allows individuals to reach milestones for retirement benefits, such as Social Security eligibility, while generating earned income. It requires understanding how continued employment interacts with various benefit programs and financial accounts.

Navigating Social Security and Medicare While Working

Continuing to work full-time after reaching eligibility for Social Security and Medicare involves specific benefit considerations. For individuals claiming Social Security benefits before their Full Retirement Age (FRA), an earnings limit applies. In 2025, if you are under your FRA for the entire year, $1 in benefits will be withheld for every $2 earned above $23,400. In the year you reach your FRA, a higher limit applies, with $1 in benefits withheld for every $3 earned above $62,160 in 2025, counting only earnings before the month you reach your FRA. Once you reach your Full Retirement Age, there is no earnings limit. Continued earnings can also increase future Social Security benefits, as the Social Security Administration recalculates benefits annually based on your highest 35 years of indexed earnings.

Medicare enrollment presents important considerations for those working full-time. Most individuals become eligible for Medicare at age 65, with an Initial Enrollment Period (IEP) lasting seven months, starting three months before their 65th birthday. If you are still working and have health insurance through an employer with 20 or more employees, you may delay enrolling in Medicare Part B without penalty, provided your employer coverage is “creditable coverage.” Upon leaving employment or when employer coverage ends, you qualify for an eight-month Special Enrollment Period (SEP) to sign up for Medicare Part B without late enrollment penalties.

However, if your employer has fewer than 20 employees, Medicare becomes your primary insurance at age 65. Enrolling in Part B during your IEP is necessary to avoid penalties. Medicare Part B premiums can also be affected by your income through the Income-Related Monthly Adjustment Amount (IRMAA). For 2025, individuals with a modified adjusted gross income (MAGI) exceeding $106,000, or married couples filing jointly with a MAGI over $212,000, will pay higher Part B and Part D premiums. This IRMAA determination is based on your tax return from two years prior.

Managing Pensions and Retirement Accounts Alongside Work

Working full-time in retirement impacts how pensions and personal retirement accounts are managed. Defined benefit pension plans often have specific rules regarding when and how benefits can be drawn while an individual is still employed. Many pension plans require a separation from service before benefits can begin, especially if you continue working for the same employer that sponsors the pension. If you return to work for the same company after starting a pension, your benefits might be suspended or adjusted.

For employer-sponsored retirement accounts like 401(k)s and individual retirement accounts (IRAs), rules for distributions and contributions vary. Required Minimum Distributions (RMDs) begin at age 73 for most tax-deferred retirement accounts. However, a “still working” exception applies to 401(k)s and other employer-sponsored plans. If you are still employed by the company sponsoring the plan and are not a 5% owner, you can delay RMDs from that specific plan until you retire.

This “still working” exception does not apply to IRAs, including Traditional, SEP, or SIMPLE IRAs; RMDs from these accounts must begin at age 73 regardless of employment status. RMDs from 401(k)s from previous employers are not eligible for this exception and must commence at age 73. While working, you can continue to contribute to retirement accounts. For 2025, individuals aged 50 and older can make catch-up contributions of an additional $1,000 to IRAs, bringing the total to $8,000. For 401(k)s, the catch-up contribution for those aged 50 and over is $7,500 in 2025, and a higher amount of $11,250 applies to individuals aged 60 to 63.

Understanding Tax Implications of Working Retirement

Combining full-time employment income with retirement benefits can create a complex tax situation. Earned income from working, Social Security benefits, pension payments, and distributions from retirement accounts all contribute to your overall taxable income. This combination of income streams can push individuals into higher federal income tax brackets.

Social Security benefits can become taxable depending on your combined income. For 2025, if your combined income (adjusted gross income, tax-exempt interest, and half of your Social Security benefits) exceeds certain thresholds, a portion of your benefits will be subject to federal income tax. For individual filers, up to 50% of benefits is taxed if combined income is between $25,000 and $34,000, and up to 85% if it exceeds $34,000. For those filing jointly, these thresholds are $32,000 to $44,000 for 50% taxation and over $44,000 for up to 85% taxation.

Distributions from pre-tax retirement accounts, such as traditional 401(k)s and IRAs, are taxed as ordinary income in the year they are withdrawn. State income taxes can also apply to various income sources, including pensions and retirement account distributions. The interplay of these different income sources necessitates careful financial planning to understand the comprehensive tax impact.