Planning to Come Out of Retirement? 2 Things to Watch For if You're on Social Security

We tend to think of retirement as a singular event, but it isn't always. You might retire only to realize you miss the social environment and purpose that a job provided you. Or you might want to retire, but find that you're draining your savings faster than you'd expected.

Returning to the workforce is a solid way to handle both of those issues. But if you've already started receiving Social Security payments, you could encounter a couple of unexpected challenges as a working beneficiary.

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1. Social Security earnings test

The Social Security earnings test withholds benefits from some seniors who work while claiming benefits under their full retirement age (FRA) -- 67 for most people today. In 2025, you lose $1 from your checks for every $2 you earn over $23,400 if you're under your FRA all year. If you reach your FRA this year, you only lose $1 for every $3 you earn over $62,160, assuming you earn this much before your birthday.

This could mean you won't get checks in some months if your income is high enough. But it's not all bad news. When you reach your FRA, the Social Security Administration (SSA) gives you a permanent benefit boost to make up for what it withheld before.

There's no way to opt out of this, so you'll need to adjust your budget if you anticipate losing money to the earnings test. You may need to rely more heavily on personal savings or income from your job during this time. Once you reach your FRA, you won't have to worry about the earnings test anymore, no matter how much you make at your job.

2. Social Security benefit taxes

You can owe Social Security benefit taxes on up to 85% of your benefits regardless of whether you're working. It all depends on your provisional income -- your adjusted gross income (AGI), plus nontaxable interest from municipal bonds, and half your annual Social Security benefit -- and your marital status, as follows:

Data source: Social Security Administration.

It's already challenging to avoid benefit taxes, and it'll likely be even more so if you're earning income from a job. You could easily find yourself in the top tier, where you pay income taxes on 85% of your benefits each year. That could amount to thousands of dollars.

There isn't really an easy way to avoid this if you can't limit your taxable income. However, you can plan for it by either setting aside some money on your own for taxes, or requesting the Social Security Administration to withhold money for taxes upfront. You can choose to have 7%, 10%, 12%, or 22% of your checks withheld. If the SSA withholds too much, you'll get the extra back as part of your tax refund.

Neither of these things should deter you from working and claiming Social Security at the same time, especially if you really need the extra income a job can provide. But it's important to stay aware of these issues, so you're not caught off guard when your Social Security check or tax bill arrives. If you have any questions about your specific situation, contact the Social Security Administration, or consult a tax professional who can give you personalized advice.

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