How Much Money Can You Make After You Retire?

Earning income after retirement is a common consideration. While it can provide financial stability, it also introduces specific financial considerations that impact benefits and taxes. Understanding these implications is important for managing financial resources effectively.

Social Security Earnings Limits

Individuals receiving Social Security benefits before their full retirement age (FRA) may find benefits reduced if earned income exceeds certain limits. For those under FRA for the entire year, the Social Security Administration (SSA) applies an annual earnings limit. In 2025, this limit is $23,400, and for every $2 earned above this, $1 is withheld from benefits.

In the year an individual reaches FRA, a higher limit applies. For 2025, this limit is $62,160. The SSA withholds $1 for every $3 earned above this, but only for earnings before reaching FRA. Earnings from the month of reaching FRA onward are not subject to limits.

A “grace year” provision applies in the first year of receiving Social Security benefits. During this year, a monthly earnings test may be used if more beneficial than the annual test. This allows full benefits for any month where earnings do not exceed a specific monthly limit, regardless of higher earnings earlier in the year. After this grace year, standard annual earnings limits apply until FRA.

Only earned income (wages or net earnings from self-employment) counts towards Social Security limits. Passive income sources like pensions, annuities, and investments generally do not. Once an individual reaches their full retirement age, there are no limits on how much they can earn, and benefits will not be reduced due to work.

Medicare Premium Adjustments

Higher retirement income can increase Medicare Part B and Part D premiums through the Income-Related Monthly Adjustment Amount (IRMAA). Individuals with incomes above certain thresholds pay a higher monthly premium. IRMAA is calculated based on a beneficiary’s Modified Adjusted Gross Income (MAGI).

MAGI for IRMAA includes earned income, Social Security benefits, pension payments, investment income, and tax-exempt interest. The Social Security Administration (SSA) uses income reported on tax returns from two years prior to determine current IRMAA surcharges. For example, 2025 Medicare premiums are based on 2023 tax returns.

Medicare establishes income thresholds that determine the IRMAA surcharge for Part B and Part D premiums. For 2025, the initial IRMAA threshold for individuals is $106,000, and for married couples filing jointly, it is $212,000. Premiums increase progressively across five income brackets for both single and joint filers.

If a life-changing event causes a significant income reduction, individuals can request a new IRMAA determination. Qualifying events include work stoppage, work reduction, marriage, divorce, or the death of a spouse. To initiate this, beneficiaries submit Form SSA-44 with supporting documentation to the Social Security Administration. This allows the SSA to review more current income, potentially reducing or eliminating the surcharge. IRMAA affects Medicare Part B and Part D premiums, but not Part A.

Taxation of Post-Retirement Earnings

Earning income after retirement has direct tax implications. Earned income from wages or self-employment is subject to federal income tax. This additional income can push individuals into a higher tax bracket, increasing overall tax liability and potentially making more of their income, including retirement distributions, subject to federal taxation.

Post-retirement earnings can make a portion of Social Security benefits taxable at the federal level. The Internal Revenue Service (IRS) uses “provisional income” to determine this. Provisional income is defined as the sum of adjusted gross income, tax-exempt interest, and half of Social Security benefits.

For single filers, if provisional income is between $25,000 and $34,000, up to 50% of Social Security benefits may be taxable. If provisional income exceeds $34,000, up to 85% of benefits may become taxable. For married couples filing jointly, these thresholds are $32,000 to $44,000 for up to 50% taxation and over $44,000 for up to 85% taxation. These thresholds have not been adjusted for inflation, meaning more retirees may find their benefits taxed as incomes rise.

Self-employed individuals after retirement pay self-employment taxes, covering Social Security and Medicare contributions. For 2025, the rate is 15.3% (12.4% for Social Security, 2.9% for Medicare). The Social Security portion applies to net earnings up to $176,100 for 2025. The Medicare portion applies to all net self-employment earnings, without an income cap.

State income tax laws vary regarding the taxation of retirement and earned income. Some states do not tax Social Security benefits, while others may, and their tax rates on earned income can differ significantly. Consult state-specific tax regulations to understand the full tax implications of post-retirement earnings.