How Working After Retirement Affects Your Social Security Payments

Retirement doesn’t always mean leaving work behind completely. Whether it’s to stay active, pursue a passion project, or supplement income, many retirees continue working after they claim Social Security benefits. But earning a paycheck in retirement can impact how much you actually receive from Social Security, at least for a while.

Here’s a clear look at how working after retirement affects your Social Security payments, and what you need to know to make the smartest financial decision for your situation.

If you decide to work after you start collecting Social Security, your age matters. The Social Security Administration (SSA) sets annual earnings limits for those under their full retirement age (FRA).

Full retirement age depends on your birth year:

Born 1943–1954: FRA is 66
Born 1955–1959: FRA is between 66 and 67
Born 1960 or later: FRA is 67

If you haven’t yet reached your FRA, Social Security places a cap on how much you can earn before it withholds some of your benefits.

How Much Can You Earn Before It Affects Your Benefits?

In 2025, the rules look like this:

Before your full retirement age: You can earn up to $22,320. If you make more than that, Social Security will withhold $1 for every $2 you earn above the limit.
The year you reach full retirement age: You can earn up to $59,520 (for the months before your birthday). After that, they withhold $1 for every $3 you earn over the limit.
After your full retirement age: There’s no limit — you can work and earn as much as you want without affecting your Social Security payments.

Important:
Even if some of your benefits are temporarily withheld, you don’t lose that money forever. Once you hit full retirement age, your monthly payment will be recalculated, and your benefit amount will increase to account for the months when payments were reduced or withheld.

Example Scenario

Let’s say you start collecting Social Security at age 63.
You decide to work part-time and earn $30,000 in 2025.
The earnings limit is $22,320, so you’re $7,680 over the limit.

Social Security would withhold $1 for every $2 over the limit:
$7,680 ÷ 2 = $3,840 withheld from your benefits for the year.

If your monthly benefit was $1,500, that’s about 2.5 months’ worth of checks withheld — but once you reach full retirement age, your future payments would be adjusted upward.

Even if you’ve already started collecting benefits, your Social Security payments are still based on your highest 35 years of earnings. If your current work earnings are higher than any year used to calculate your original benefit, Social Security will automatically recalculate and increase your monthly payment.

This means that working after retirement can sometimes boost your benefits, especially if you’re replacing lower-earning years from earlier in your career.

Other Things to Consider

Taxes: Earning additional income could mean a portion of your Social Security benefits becomes taxable. Depending on your total income, you might owe taxes on up to 85% of your Social Security benefits.
Health Insurance: If you’re eligible for Medicare, continuing to work may affect your health coverage options. You’ll want to review how employer health insurance interacts with Medicare if you’re still on the job.
Work-Life Balance: Beyond financial considerations, think about how part-time or full-time work will fit into the retirement lifestyle you envisioned.

Conclusion

Before making your decision, it’s smart to review your income plans and meet with a financial advisor like TruNorth Advisors to help understand the earnings limits and talk with a financial advisor if you want to maximize your benefits while still enjoying your retirement.