What Happens If You Work After Retirement?

Many individuals choose to continue working beyond their traditional retirement age. However, continuing to work while also receiving retirement benefits can introduce various complexities.

Social Security Benefit Adjustments

Working after you begin receiving Social Security benefits can lead to adjustments, particularly if you have not yet reached your full retirement age (FRA). The Social Security Administration (SSA) applies an “earnings test” to individuals who work and claim benefits before their FRA. Your full retirement age (FRA) is determined by your birth year.

For those collecting Social Security benefits before their FRA, there are annual earnings limits. In 2025, if you are under your full retirement age for the entire year, your benefits will be reduced by $1 for every $2 you earn above $23,400. In the calendar year you reach your full retirement age, a different earnings limit applies. For 2025, benefits are reduced by $1 for every $3 earned above $62,160, but only for earnings prior to the month you reach your FRA. Once you reach your full retirement age, the earnings test no longer applies, and your benefits will not be reduced regardless of how much you earn.

Any Social Security benefits withheld due to the earnings test are not permanently lost. Instead, they are factored back into your benefit calculation once you reach your full retirement age through an “adjustment of the reduction factor” (ARF). This recalculation increases your monthly benefit amount, ensuring you eventually receive credit for benefits temporarily held back due to exceeding earnings limits.

Income Tax Considerations

Earning income from work after retirement impacts your federal and state income tax situation. Any wages, salaries, or self-employment income you earn is subject to federal income tax. This additional income increases your overall taxable income, potentially moving you into a higher tax bracket.

Working can also affect the taxation of your Social Security benefits. A portion of your Social Security benefits may become taxable if your “combined income” exceeds certain thresholds. Combined income is calculated as your adjusted gross income, plus any nontaxable interest, plus one-half of your Social Security benefits. If your combined income is between $25,000 and $34,000 for an individual, or $32,000 and $44,000 for a married couple filing jointly, up to 50% of your benefits may be taxable. If your combined income exceeds $34,000 for an individual or $44,000 for a married couple filing jointly, up to 85% of your benefits may be subject to federal income tax.

In addition to income taxes, your earned income will also be subject to Federal Insurance Contributions Act (FICA) taxes. FICA taxes include Social Security and Medicare taxes. For employees, 6.2% of your wages up to the annual Social Security wage base limit ($176,100 in 2025) goes to Social Security tax, and 1.45% of all wages goes to Medicare tax. If you are self-employed, you are responsible for both the employer and employee portions of FICA taxes, totaling 12.4% for Social Security and 2.9% for Medicare.

Medicare and Health Coverage

Continuing to work after age 65 can impact your Medicare enrollment and the costs associated with your health coverage. If you or your spouse have active employer-sponsored health coverage through current employment, you may be able to delay enrolling in certain parts of Medicare without penalty.

You generally qualify for a Special Enrollment Period (SEP) to sign up for Medicare Part A and/or Part B when your employer coverage ends, or when you stop working, whichever comes first. This SEP lasts for eight months from the qualifying event. The coordination between your employer plan and Medicare depends on the size of the employer. If the employer has 20 or more employees, the employer’s plan is primary, meaning it pays first. For employers with fewer than 20 employees, Medicare usually becomes the primary payer.

Higher income from working can also lead to increased Medicare premiums for Part B and Part D due to the Income-Related Monthly Adjustment Amount (IRMAA). IRMAA is an additional charge applied to your premiums if your modified adjusted gross income (MAGI) exceeds certain thresholds. For 2025, IRMAA may apply if your 2023 income was above $106,000 for an individual or $212,000 for a married couple filing jointly. The Social Security Administration determines IRMAA based on your tax returns from two years prior, so your 2023 income affects your 2025 Medicare premiums.

Other Retirement Account Implications

Working after retirement can also influence other types of retirement accounts. Required Minimum Distributions (RMDs) are mandatory withdrawals that individuals must take from most traditional retirement accounts once they reach a certain age. For those turning 73 in 2025, RMDs begin by April 1 of the year following the year they turn 73.

However, a “still-working exception” allows some individuals to delay RMDs from their current employer’s 401(k) plan. This exception applies if you are still working for the employer sponsoring the plan, are not a 5% owner of the business, and the plan permits such a delay. This exception does not apply to IRAs or 401(k)s from previous employers, meaning RMDs from those accounts must still be taken by the regular deadline.

Continuing to work also allows for ongoing contributions to retirement accounts, which can further boost your savings. You can continue to contribute to employer-sponsored plans like 401(k)s as long as you are employed and meet plan eligibility requirements. For 2025, the employee contribution limit for 401(k)s is $23,500, with an additional catch-up contribution of $7,500 for those age 50 and older.

Similarly, you can contribute to traditional or Roth IRAs if you have earned income, even if you are already taking distributions. For 2025, the IRA contribution limit is $7,000, with an additional $1,000 catch-up contribution for those age 50 and older. Eligibility for Roth IRA contributions is subject to income limits.