2 Surprising Ways Working in Retirement Could Cost You Social Security Benefits
Key Points
Early claimers who are still working could lose some of their checks to the earnings test.
Earnings from a job may increase your likelihood of owing Social Security benefit taxes.
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Working in retirement is one of the smartest moves you can make if you weren't able to save as much as you'd intended when you were younger. It reduces your reliance on your personal savings and allows your investments to grow for longer. It can also give you a sense of purpose and, depending on the work, an opportunity to socialize with others.
But a retirement job also has drawbacks. You'll have less time for hobbies, and it could cost you Social Security benefits in a couple of ways.
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1. Social Security earnings test
The Social Security earnings test withholds benefits from seniors who are claiming Social Security under their full retirement age (FRA) -- 67 for most people today -- while earning a significant amount from their jobs. How much you lose depends on your age and income.
In 2026, the Social Security Administration will withhold $1 from your checks for every $2 you earn over $24,480 if you'll be under your FRA all year. You lose $1 for every $3 you earn over $65,160 if you'll reach your FRA this year and earn this amount before your birth month.
Some high earners may find that the earnings test wipes out their monthly checks completely, but this is only temporary. The Social Security Administration increases your checks at your FRA if you've previously lost money to the earnings test.
Until then, you may have to settle for smaller Social Security benefits unless you can keep your income from your job below the relevant threshold. Remember, the Social Security Administration typically increases the earnings test limits each year to account for inflation, so you may be able to earn more from your job in 2027 and beyond before you lose any of your benefits.
2. Social Security benefit taxes
The federal government taxes the Social Security benefits of all seniors whose provisional incomes -- adjusted gross income (AGI), plus any nontaxable interest from municipal bonds and half their annual Social Security benefit -- exceed the following limits based on their marital status:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Under: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data source: Social Security Administration.
Working a retirement job will raise your AGI and may put you at risk of owing benefit taxes. This could add thousands of dollars to your tax bill each year. While some people can reduce their expenses or rely more on Roth savings, which don't affect provisional income, others just have to brace themselves for taxes.
You can either set aside money for these taxes on your own or request that the Social Security Administration withhold money from your checks up front. An accountant may be able to help you figure out your best move.
Neither of the things listed above should deter you from taking a retirement job if you need it to make ends meet. Just prepare yourself for how your job might affect your Social Security benefits so you aren't caught off guard when your checks or your tax bill arrive.
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