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Working during retirement can be a great way to stay active and social — and for many, it’s a necessity. Americans over 65 had around $4,818 on average in monthly expenses, according to the latest data from the Bureau of Labor Statistics. However, retired workers only received an average of $1,918 per month in 2024 in Social Security, meaning that it covered less than half of monthly expenses.
Earning extra income can help bridge this gap, but if you start receiving Social Security before you reach full retirement age, you may actually lose some of your benefits if you earn too much. Earning below the annual income limits can also negatively affect your benefit amount, depending on your work and income history. For folks who plan to work indefinitely, holding off until you reach full retirement age to apply for Social Security benefits may be beneficial.
We break down how work can affect your Social Security benefits, including limits, tax implications and maximizing your benefits. But note that rules and exemptions can vary widely depending on your where you live, how much you earn and other personal circumstances, so it’s best to talk with a tax professional, CPA or trusted financial advisor for specific guidance as you navigate retirement.
How much income can I earn while on Social Security?
Technically, there’s no limit to how much you can make on Social Security. However, you will lose a portion of your benefit if you sign up for Social Security before you reach full retirement age.
Full retirement age — or FRA — is the age at which you can receive full Social Security benefits without any penalty for earning more money on the side. Your FRA can range from 65 to 67, depending on the year you were born. The Social Security Administration hosts an online retirement calculator to help you find your FRA.
How pre-retirement age income affects your benefits
The Social Security Administration treats income before retirement age differently, depending on how close you are to your FRA:
In the years before you reach FRA, the SSA deducts $1 for every $2 you earn over $22,320.
In the months before you reach your FRA, the SSA deducts $1 for every $3 you earn over $59,520. This does not apply to the month you reach FRA.
Say you signed up for Social Security benefits three years before you reached FRA. If you earned $70,000 that year, you would lose $23,840 in Social Security benefits.
However, if you signed up for Social Security benefits the year you reached FRA and had that same $70,000 salary, you would not reach your annual limit on a $70,000 salary — unless you had a birthday in December.
But, say you got a raise and earned $70,000 during the months before you reached your FRA. In that case, you would lose around $3,493 in Social Security benefits that year.
The mid-year retirement loophole
The Social Security Administration has a special rule that waives annual limits for those who retire and apply for Social Security in the middle of a year before you reach your FRA. To qualify for this loophole, your monthly earnings must be below a certain threshold — which depends on how close you are to your FRA:
If you retire over a year before you reach your FRA, you’ll receive the full Social Security benefit for any month that you earned $1,860 or less.
If you retire months before you reach your FRA, you’ll receive your full Social Security benefit for each month you earned $4,960 or less.
This means that for most people, you can apply for Social Security within the year before you reach your FRA without hurting your monthly benefit check.
However, you’ll have to stay unemployed until you reach your FRA. If you devote 15 to 45 hours a month to a high-skilled job or more than 45 hours for any other type of self-employed work, you’re subject to the same annual limit as any other pre-FRA retiree.
As you can see, Social Security has a lot of moving parts. A financial planner or tax professional can help you better understand how your specific retirement plans will affect your benefits.
Dig deeper: Best jobs for seniors, retirees and mature workers — including second-act careers
How Social Security benefits work
Social Security is a federal retirement insurance program. Most people who have worked and paid taxes in the U.S. for more than 10 years are eligible for Social Security as soon as they turn 62. The monthly benefit you receive is based on your highest 35 years of earnings and how old you are when you retire. The Social Security Administration also adjusts your benefits each year to keep up with the cost of living.
Early retirement benefits
Folks between 62 and their FRA receive reduced benefits, depending on how close they are to retirement age. The Social Security Administration reduces your benefits by around 0.55% per month before retirement age for up to 36 months. If you retire more than three years before you reach FRA, the SSA will deduct 0.42% per additional month from your benefit.
Let’s take a look at the most extreme case: Say you retired as soon as you turned 62 and your retirement age is 67. That means you have a full 60 months before you reach your FRA. You’d lose 20% of your FRA for the first 36 months and an additional 10% for the 24 remaining months. That’s a full 30% of your monthly benefit that you’d be missing out on by retiring early.
Delayed retirement perks
Folks who wait until after they reach their FRA to apply for Social Security are eligible for a delayed retirement credit per year. This can range from 3% to 8% each year you delay retirement, until you turn 70. Your retirement credit depends on several factors, including when you were born, but you can use a Social Security Administration calculator to estimate how much you might boost your benefit by retiring later.
Delaying retirement may also boost your benefits by adding to your bank of high-earning years. That’s because Social Security benefits are based on the highest earning months over 35 years. If you’re currently making more money than you did 35 years ago — or you had a few low-earning years while you stepped back from work to raise children — delaying retirement may help boost your benefit even more.
Talk with a financial planner or tax professional about how you can maximize your Social Security as part of your retirement planning.
Dig deeper: How to find a trusted retirement advisor for peace of mind in your golden years
What does the Social Security Administration consider “income”?
The Social Security Administration considers the following types of earnings to be “income”:
Wages from a full-time job
Wages from a part-time job
Cash tips over $20
Bonuses
Vacation pay
Commissions
Non-cash tips and most retirement income do not count as income, including:
Dig deeper: How to start a consulting business in retirement — and ways it can help your budget beyond the income
What if I live outside the U.S. in retirement?
Moving abroad during retirement generally won’t affect your Social Security benefits, as long as you’re a U.S. citizen and you live in a country where the Social Security Administration can send the funds. However, you’ll need to report divorce, death and other changes to your familial or financial situation.
There are some exceptions. Americans residing in North Korea and Cuba and most citizens living in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan may not be able to receive their Social Security benefits on a regular basis. If you live in one of these countries, the U.S. will hold on to your benefits and send them to you as soon as you’re able to visit a country without restrictions on money transfers.
Noncitizens on Social Security can continue to receive the funds while living outside of the U..S for six months at a time, unless you meet certain conditions — such as receiving benefits related to U.S. armed forces service or railroad work. After living for six months outside of the country, your benefits stop until you return to the U.S. for a full calendar month. Noncitizens living in North Korea or Cuba will not receive Social Security payments for the months that they live in those countries. Dependents and survivors may also need to meet additional conditions.
Working outside the U.S. in retirement
If you work outside of the U.S. and have not reached your full retirement age, you’re required to report it to the Social Security Administration or Federal Benefits Unit associated with the U.S. embassy in that country. The SSA will withhold your benefit for every month that you work more than 45 hours and don’t pay Social Security tax — even if you live in a country that is exempt from U.S. Social Security taxes.
If you receive Social Security checks while living abroad, you’re also subject to the same benefit reductions that apply to early retirees, as well as income tax.
If you plan to live or work outside the U.S., seek the guidance of a financial advisor, CPA or legal professional specializing in retirees who live abroad to minimize your risks, liabilities and concerns.
What is the tax rate for working retirees?
Regular income tax rates apply for income such as wages, dividends, interest, self-employment earnings and taxable retirement account distributions. Currently, income tax rates range from 10% to 37%, depending on how you file your taxes and how much you earn. However, most Social Security recipients are eligible for age-related tax breaks that can reduce your IRS bill.
If you earn enough taxable income in a year, you may also have to pay federal income tax on a portion of your Social Security benefits. This depends on how you file your taxes:
Individuals earning between $25,000 and $34,000 pay income tax on as much as 50% of their benefits.
Individuals earning over $34,000 pay income tax on as much as 85% of their benefits.
Couples who file a joint return and earn a combined income of between $32,000 and $44,000 pay income tax on up to 50% of their benefits
Couples filing a joint return who earn a combined income of over $44,000 pay income tax on up to 85% of their benefits.
🔍 Use this formula to calculate your combined income if you’re married and filing jointly
Combined income 🟰 Adjusted gross income ➕ Nontaxable interest ➕ Half of your Social Security benefits
The Social Security Administration doesn’t specify rules for married couples filing separately other than to say that, in most cases, you’ll have to pay taxes on your Social Security benefits.
Dig deeper: Tax breaks after 50 you might not know about
State taxes
Income taxes vary from state to state, with several charging no income tax at all. But a handful tax Social Security in addition to other sources of income such as wages and interest.
These rates are generally lower than your federal income tax rate — usually around 5% — and often only apply to folks earning above a certain threshold. In states like Rhode Island, taxes only apply to residents below their FRA and earning above a specific threshold.
Dig deeper: How all 50 states tax retirement income: A comprehensive list for 2024
How the 2024 election could affect working retirees
Both presidential candidates could bring changes to the Social Security Administration that might affect your Social Security benefits. Neither former President Donald Trump nor Vice President Kamala Harris have outlined definitive plans — and any proposed changes would have to be approved by Congress, which may or may not be divided. Here’s how it appears Social Security could be affected by each candidate.
Donald Trump
Donald Trump has frequently mentioned eliminating federal Social Security taxes altogether during the 2024 campaign. This would most benefit high-earning retirees who have also earned high salaries for much of their careers. Individuals who have under $25,000 in taxable income or married couples earning less than $32,000 would see no difference in their benefits.
However, critics say that this tax cut, along with Trump’s additional proposed tax cuts, could further bind the Social Security Agency and its already-tight budget. In the short term, less money in the budget could result in slowing down the agency.
But there is another risk to this approach. Tightening the budget could also push forward the date when the Social Security Agency reaches a shortfall, which experts currently predict will happen as soon as 2033 for the Old-Age and Survivors Insurance (OASI) Trust Fund. If this happens, the Social Security Agency might only be able to issue around 79% of scheduled retiree benefits — unless there are adjustments to the tax rate or population changes that bolster the agency’s budget.
Kamala Harris
Kamala Harris has proposed tax increases on the highest-earning Americans to provide more funding for government programs, including Social Security. Her campaign rhetoric has focused on increasing and improving benefits, such as reforming the cost-of-living adjustment to better reflect changes in inflation.
A Harris administration would likely benefit the middle class and low-income Americans, as well as folks with limited work experience. However, this largely depends on increasing taxes on high-earning Americans. Critics also point out that increasing government spending in general could increase the national deficit and may spur inflation.
Ultimately, most pundits agree that neither candidate will have a significant impact on how Social Security works. It’s one of the most popular government programs, and if it ever reaches a shortfall, Congress will likely step in and save it. If Republicans win in a landslide, you might pay fewer taxes but have a harder time adjusting your benefits. If Democrats take the White House and Congress, you might get a little more money each month and have an easier time getting in touch. If Congress is divided, you probably won’t see any change at all.
FAQ: Social Security and working in retirement
Get answers to common questions about working and receiving Social Security.
Can I get Social Security disability benefits if I’m already receiving Social Security retirement benefits?
Generally no, you legally cannot receive both Social Security disability and retirement benefits at the same time. Typically, Social Security disability and retirement benefits are the same amount, so if you become disabled after you reach full retirement age, you may as well stick to the retirement benefits.
However, if you become disabled after you apply for retirement benefits but before you reach full retirement age, you can apply to switch over to disability. If approved, you’ll receive the full benefit amount. However, don’t expect this to happen quickly, thanks to stringent requirements and a slow-moving process. (A good friend of mine died before the administration could process her application and an appeal.)
What happens if I stop working but delay Social Security?
If you stop working early but delay Social Security past your FRA, you will qualify for delayed retirement perks. However, you won’t be able to contribute to your work history. If you have over 35 years of work experience and your salary was higher in the past, this will not affect your benefit amount. If you earn more than you used to, you may not receive as high a benefit as you would have if you continued to work.
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About the writer
Anna Serio-Ali is a trusted lending expert who specializes in consumer and business financing. A former certified commercial loan officer, Anna’s written and edited more than a thousand articles to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in Business Insider, CNBC, Nasdaq and ValueWalk, among other publications, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
Article edited by Kelly Suzan Waggoner
