How Much Money Can You Make After Retirement?

Many individuals consider earning income after retiring to supplement savings, cover expenses, or remain engaged. Working during retirement has financial implications, as various rules and regulations can affect earned income, Social Security benefits, taxes, and even healthcare costs. Navigating these considerations helps individuals make informed decisions about their financial well-being.

Earning Limits and Social Security Benefits

Working while receiving Social Security retirement benefits involves annual earnings limits that can temporarily reduce payments. These limits depend on whether an individual has reached their full retirement age (FRA), generally 67 for those born in 1960 or later. If benefits begin before FRA, a lower earnings limit applies.

For those under their full retirement age for the entire year, the Social Security Administration (SSA) sets an annual earnings limit. In 2025, this limit is $23,400. If earned income exceeds this, the SSA deducts $1 from benefits for every $2 earned over the limit. For example, earning $25,000 in 2025 (which is $1,600 over the limit) would reduce benefits by $800.

A different rule applies in the year an individual reaches their full retirement age. For 2025, the earnings limit for the months before reaching FRA is $62,160. The SSA deducts $1 from benefits for every $3 earned above this higher limit. Only earnings accumulated before reaching full retirement age count towards this limit.

Once an individual reaches their full retirement age, the earnings limit no longer applies, and benefits are not reduced regardless of income. They can work and receive full Social Security benefits without deductions. Income types counting towards these limits include wages, net self-employment earnings, bonuses, commissions, and vacation pay. Conversely, income sources like pensions, annuities, investment income, interest, or veterans’ benefits do not count.

Taxation of Retirement Income

Earning income in retirement has tax implications. Earned wages or self-employment income are subject to federal income taxes. This additional income can also impact the taxability of Social Security benefits. The Internal Revenue Service (IRS) uses “provisional income” to determine how much of a person’s Social Security benefits may be subject to federal income tax.

Provisional income is calculated by adding adjusted gross income (AGI), nontaxable interest, and half of Social Security benefits. This amount is then compared to thresholds to determine the taxable percentage of benefits. For single filers, if provisional income is less than $25,000, benefits are not taxable. Between $25,000 and $34,000, up to 50% of benefits may be taxable.

If a single filer’s provisional income exceeds $34,000, up to 85% of their Social Security benefits become taxable. For married couples filing jointly, different thresholds apply. If their provisional income is less than $32,000, benefits are not taxable. Between $32,000 and $44,000, up to 50% of benefits may be taxed.

For married couples filing jointly with provisional income over $44,000, up to 85% of their Social Security benefits can be taxable. Some jurisdictions may also impose state income taxes on Social Security benefits or other retirement income. Individuals with substantial self-employment income or insufficient tax withholding may need to make estimated tax payments to avoid penalties.

Income and Medicare Costs

Higher income in retirement can influence Medicare costs through the Income-Related Monthly Adjustment Amount (IRMAA). IRMAA is a surcharge added to monthly premiums for Medicare Part B (medical insurance) and Part D (prescription drug coverage). This surcharge is determined by a person’s modified adjusted gross income (MAGI) from two years prior. For example, 2025 Medicare premiums are based on 2023 MAGI.

Income thresholds trigger higher premiums. For 2025, individuals with 2023 MAGI over $106,000, or married couples filing jointly with MAGI over $212,000, will pay an IRMAA. These thresholds are adjusted annually for inflation. The standard monthly premium for Medicare Part B in 2025 is $185.00.

If income exceeds the initial threshold, Part B premiums increase, with surcharges ranging from $74.00 to $443.90 per month, depending on income bracket. These surcharges are added to the standard Part B premium. Medicare Part D also has IRMAA surcharges; the 2025 national base premium for Part D is $36.78. Part D surcharges range from $13.70 to $85.80 per month, varying by income level.