If You Are Retired, How Much Can You Earn?

It is common for individuals to consider earning income during retirement, whether to supplement their savings, cover unexpected expenses, or simply remain engaged. Understanding the implications of working while receiving retirement benefits is important, as earnings can affect Social Security payments and tax obligations. The specific rules vary depending on an individual’s age and the amount of income earned.

Social Security Earnings Limits

Working while collecting Social Security benefits can lead to a reduction in those benefits, particularly if an individual has not yet reached their full retirement age (FRA). Full retirement age is the point at which a person becomes eligible to receive their primary Social Security benefit without reduction. This age varies based on birth year; for those born in 1960 or later, FRA is 67, while for individuals born between 1943 and 1959, it ranges from 66 to 66 and 10 months.

For individuals who are under their full retirement age for the entire year, an annual earnings limit applies. In 2025, this limit is $23,400. If earnings exceed this amount, Social Security will deduct $1 from benefits for every $2 earned above the limit. This means half of the excess earnings will be withheld from benefits.

A different, higher earnings limit applies in the year an individual reaches their full retirement age. For 2025, this limit is $62,160. In this specific year, Social Security deducts $1 from benefits for every $3 earned above the limit, but only earnings accumulated before the month of reaching full retirement age are counted towards this threshold. Once an individual reaches their full retirement age, there is no longer any limit on how much they can earn, and their benefits will not be reduced regardless of income.

The types of income that count towards these earnings limits include wages earned from an employer and net earnings from self-employment. Conversely, many other forms of income do not affect Social Security benefits, such as pensions, government retirement benefits, annuities, investment income like dividends and interest, and capital gains.

Any Social Security benefits withheld due to exceeding the earnings limits are not permanently lost. These withheld amounts are added back into the benefit calculation once an individual reaches full retirement age, resulting in a higher monthly benefit amount over their remaining lifespan.

Tax Implications of Retirement Earnings

Beyond potential Social Security benefit reductions, earning income in retirement also carries various tax implications. Earned income, such as wages or net earnings from self-employment, is generally subject to federal income tax. Federal income tax rates for 2025 range from 10% to 37%, depending on the taxable income and filing status. State and local income taxes may also apply, varying by jurisdiction.

Individuals who are self-employed will also be subject to self-employment tax, which covers Social Security and Medicare contributions. For 2025, the self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare. The Social Security portion of this tax applies to net earnings up to $176,100 for 2025, while the Medicare portion applies to all net earnings. An additional 0.9% Medicare tax may apply if net self-employment earnings exceed $200,000 for single filers or $250,000 for those married filing jointly.

Earning income in retirement can also lead to a portion of Social Security benefits becoming taxable at the federal level. The Internal Revenue Service (IRS) uses a calculation called “combined income” to determine this. Combined income is defined as your adjusted gross income, plus any non-taxable interest income, and one-half of your Social Security benefits.

The amount of Social Security benefits subject to taxation depends on this combined income. For single filers, if combined income is below $25,000, no Social Security benefits are taxable. Between $25,000 and $34,000, up to 50% of benefits may be taxed, and above $34,000, up to 85% of benefits may be taxable. For those married filing jointly, the thresholds are $32,000 (no tax), $32,000 to $44,000 (up to 50% taxable), and above $44,000 (up to 85% taxable). These income thresholds are not adjusted for inflation, which means more people may find their benefits becoming taxable over time as incomes rise.

Higher earnings in retirement can also impact Medicare premiums through the Income-Related Monthly Adjustment Amount (IRMAA). IRMAA can result in higher monthly premiums for Medicare Part B and Part D if an individual’s modified adjusted gross income (MAGI) exceeds certain thresholds. The IRMAA determination for a given year is based on the income reported on tax returns from two years prior; for instance, 2025 IRMAA amounts are based on 2023 income. For 2025, the IRMAA brackets for Part B and D begin for single filers with MAGI above $106,000 and for joint filers with MAGI above $212,000. The standard Medicare Part B premium for 2025 is $185 per month, with additional surcharges applied based on income brackets.

Reporting Your Earnings

Accurately and promptly reporting earnings to the Social Security Administration (SSA) is important for retirees who continue to work, especially if earnings are expected to exceed the annual limits, as this can affect benefit payments.

There are several methods available for reporting earnings to the SSA. Individuals can report wages online through their “my Social Security” account, utilize automated telephone wage reporting systems, or visit a local Social Security office in person. Reporting can also be done by mail. Keep thorough records, including receipts from the SSA confirming reported earnings, and maintain pay stubs or other documentation of income.

Failure to report earnings accurately or in a timely manner can lead to overpayments of Social Security benefits. If an overpayment occurs, the SSA will seek to recover the funds, potentially by withholding future benefits. Individuals who have been overpaid have rights, including the ability to request reconsideration or apply for a waiver if repayment would cause financial hardship. Payment arrangements can also be established to repay the amount in smaller, manageable installments.