Working & Collecting Social Security: What You Need to Know

July 24, 2025

Retirement today isn’t always about kicking back and relaxing on a beach. For many Americans, retirement includes some level of continued work—whether it’s part-time employment, consulting, freelancing, or even launching a small business. But if you’re collecting Social Security while still earning income, it’s essential to understand how working affects your benefits, taxes, and Medicare costs.

The decision to keep working after starting Social Security often boils down to necessity. Longer life spans, inflation, and concerns over outliving savings are leading more people to rethink what retirement looks like. According to Chris Farrell, author of Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and the Good Life, many are choosing to work not only for the income but also for the purpose and structure it provides.

Still, the financial consequences of working while drawing Social Security should be clearly understood before taking that path.

Timing Is Everything

The age at which you claim Social Security benefits plays a big role in what you’ll receive. If you begin claiming before your full retirement age (FRA)—which ranges from 66 to 67 depending on your birth year—your monthly benefits will be permanently reduced. For example, claiming at age 62 can lower your benefit by up to 30%.

On top of that, if you’re earning income before reaching FRA, the Social Security Administration (SSA) may withhold part of your benefit. In 2025, if you earn more than $23,400 annually, your benefits will be reduced by $1 for every $2 you earn above that threshold. The year you hit your FRA has a higher limit—$62,160 in 2025—with a reduction of $1 for every $3 over the limit.

Here’s the good news: These reductions aren’t lost forever. Once you reach full retirement age, your monthly benefit will be recalculated to account for the benefits previously withheld.

What Counts as "Earned Income"?

Not all income affects your Social Security check. Only earned income—wages, salaries, tips, bonuses, commissions, and net self-employment income—is considered for the earnings test. Investment income, pensions, annuities, and other passive income sources don’t count against the earnings limits.

Once you’ve passed your full retirement age, the earnings test disappears entirely. You can earn as much as you like without any reduction in your Social Security benefits.

Tax Implications of Working While Collecting

Even if you don’t lose benefits due to the earnings test, you may owe taxes on your Social Security income. The IRS uses a formula called “combined income,” which includes your adjusted gross income (AGI), nontaxable interest, and half of your Social Security benefits.

For single filers:

●     Combined income under $25,000: No Social Security tax

●     $25,000–$34,000: Up to 50% of your benefits may be taxable

●     Over $34,000: Up to 85% of your benefits may be taxable

For joint filers:

●     Combined income under $32,000: No Social Security tax

●     $32,000–$44,000: Up to 50% may be taxable

●     Over $44,000: Up to 85% may be taxable

Additionally, 13 states also tax Social Security income, so be sure to research how your home state treats these benefits.

Don’t Forget Medicare

Once you’re 65 and enrolled in Medicare, earned income can also impact your premiums. In 2025, most people pay $185 per month for Medicare Part B, but higher earners (individuals with income over $106,000 or couples over $212,000) could pay anywhere from $259 to $628.90 due to the Income-Related Monthly Adjusted Amount (IRMAA).

This same IRMAA adjustment applies to Medicare Part D (prescription drug coverage), so working and earning more could push you into a higher premium tier.

Continued Contributions to Retirement Accounts

One often-overlooked benefit of earning income in retirement is the ability to keep contributing to retirement savings accounts. As long as you have earned income, you may be eligible to contribute to:

●     Traditional or Roth IRAs (up to age 73 for traditional IRAs)

●     Health Savings Accounts (HSAs), if you have a qualifying high-deductible health plan

●     Employer-sponsored plans like 401(k)s

If you're still working for an employer, you may also delay Required Minimum Distributions (RMDs) from that employer’s retirement plan until you retire.

These continued contributions can be especially helpful if you’re catching up on retirement savings or just want to boost your financial security in later years.

Final Thoughts

There are plenty of reasons to keep working after you begin collecting Social Security—whether it’s financial need, personal fulfillment, or a desire to stay mentally and socially engaged. But the decision comes with trade-offs, including potential reductions in benefits, higher taxes, and rising Medicare premiums.

Before making any moves, consider speaking with a financial advisor or tax professional to evaluate how your earnings will impact your overall retirement strategy. A little planning can go a long way in making your working retirement both sustainable and satisfying.

Sources:

https://www.fidelity.com/viewpoints/retirement/working-in-retirement-part2

Disclosure:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.