Can You Retire at 65 and Still Work?

Individuals can retire at age 65 while continuing to work. Many choose this path to supplement retirement income, maintain purpose, or because they enjoy their profession. Navigating this transition involves understanding how continued employment interacts with various retirement benefits and savings vehicles. This includes careful consideration of Social Security, Medicare, and personal retirement accounts, each with its own rules and implications.

Social Security Benefits While Working

Continuing to work while receiving Social Security benefits can impact the amount of benefits received, particularly if an individual has not yet reached their full retirement age (FRA). For those under FRA for the entire year, an earnings limit applies. In 2025, Social Security will deduct $1 in benefits for every $2 earned above $23,400. This reduction is based solely on earned income, not on income from investments or other sources.

A different earnings limit applies in the calendar year an individual reaches their full retirement age. For 2025, this limit is $62,160, and Social Security will deduct $1 in benefits for every $3 earned above this amount. Only earnings prior to the month of reaching FRA count toward this limit. Once an individual reaches their full retirement age, the earnings limit no longer applies, and they can earn any amount without their Social Security benefits being reduced.

Social Security benefits may also become subject to federal income tax depending on an individual’s “combined income.” Combined income includes adjusted gross income, nontaxable interest, and half of the Social Security benefits received. For single filers, up to 50% of benefits may be taxed if combined income is between $25,000 and $34,000, and up to 85% if it exceeds $34,000. For those married filing jointly, up to 50% of benefits can be taxed if combined income falls between $32,000 and $44,000, increasing to 85% for combined incomes above $44,000.

Delaying the start of Social Security benefits past full retirement age can lead to higher monthly payments through delayed retirement credits. These credits are earned each month benefits are postponed beyond FRA, up to age 70. The percentage increase varies by birth year, but it can significantly boost future benefits.

Medicare Coverage While Working

Medicare eligibility generally begins at age 65, regardless of work status. The Initial Enrollment Period (IEP) is a seven-month window around the 65th birthday, encompassing the three months before, the month of, and three months after. During this period, individuals can enroll in Medicare Part A (hospital insurance) and Part B (medical insurance). Understanding how employer health plans interact with Medicare helps avoid penalties and ensures continuous coverage.

Medicare Part A is often premium-free, so it is advisable to enroll at age 65, even if still covered by an employer’s health plan. Part A can coordinate with and supplement existing employer coverage, especially for inpatient hospital stays. However, enrolling in any part of Medicare makes an individual ineligible to contribute to a Health Savings Account (HSA).

Enrollment in Medicare Part B can often be delayed without penalty if an individual has “creditable coverage” through an employer with 20 or more employees. This means the employer’s plan provides coverage that is at least as good as Medicare Part B. If the employer has fewer than 20 employees, Medicare typically becomes the primary payer, and delaying Part B enrollment can result in late enrollment penalties.

When employment or employer health coverage ends, a Special Enrollment Period (SEP) allows individuals to sign up for Medicare Parts A and B without penalty. This SEP typically lasts for eight months after employment or group health coverage ends. Enrollment during this window avoids potential lifetime late enrollment penalties for Part B, which can increase monthly premiums. Similar considerations apply to Medicare Part D (prescription drug coverage); delaying enrollment without creditable drug coverage from an employer plan can also lead to penalties.

Employer Plans and Personal Retirement Accounts

Continuing to work at age 65 impacts how individuals manage employer-sponsored retirement plans, such as 401(k)s, and personal retirement accounts like IRAs. Required Minimum Distributions (RMDs) are mandatory withdrawals that generally must begin from traditional tax-deferred accounts. The age at which RMDs typically begin has recently shifted, increasing to age 73 in 2023, and scheduled to rise again to age 75 in 2033.

An important exception to RMD rules exists for individuals still working. If an individual is employed by the company sponsoring their 401(k) or other employer-sponsored retirement plan, they can often delay taking RMDs from that specific plan until they actually retire. This “still working” exception does not apply to IRAs or to 401(k)s held with previous employers; RMDs from those accounts must begin once the individual reaches the RMD age, regardless of current employment status. Roth 401(k) accounts are generally exempt from RMDs during the owner’s lifetime, aligning with the rules for Roth IRAs.

Continuing to work also allows individuals to keep contributing to their retirement accounts, which can significantly boost their savings. For 2025, the employee contribution limit for 401(k) plans is $23,500. Individuals aged 50 and older can make additional “catch-up” contributions. In 2025, this catch-up contribution for 401(k)s is $7,500, allowing a total contribution of $31,000. A higher catch-up contribution of $11,250 applies for those aged 60 to 63, bringing their total to $34,750.

For IRAs, the contribution limit for 2025 is $7,000. Those aged 50 and older can contribute an additional $1,000 catch-up amount, for a total of $8,000. While employer pension plans vary, some allow continued employment while receiving benefits, while others may require full retirement before payouts begin.