Going Back to Work in Retirement Could Impact Your Social Security Benefits -- for Better and for Worse

There’s a reason some retirees opt to reenter the workforce after being out of it for years. Retirement has a sneaky way of being more expensive than many people anticipate. You may decide to start working again in retirement to drum up extra income.

Also, retirement can be kind of boring. It’s hard to go from a full-time work schedule to suddenly having little to do with your days. And if you’re craving the company of others, that’s reason enough to return to a job — even if you’re not so desperate for extra retirement income.

But if you’re going to return to work while collecting Social Security, it’s important to know the rules. Here’s how starting a job could impact your benefits for better and for worse.

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First, the negative

Once you reach full retirement age (FRA), you can earn any amount of money without risking having some of your Social Security withheld. But if you haven’t yet reached FRA, you’ll be subject to an earnings-test limit, and exceeding it could result in a smaller Social Security check temporarily.

In 2024, the earnings-test limit is $22,320. From there, you’ll risk having $1 in Social Security benefits withheld per $2 of earnings.

The earnings-test limit is higher this year if you haven’t yet reached FRA but will be hitting it later in 2024. In that case, the limit is $59,520. From there, you’ll risk having $1 in Social Security benefits withheld per $3 of earnings.

Earnings that are withheld due to exceeding the earnings-test limit aren’t forfeited for good. In fact, they’ll be added back to your monthly payments once you reach FRA. But you may have to deal with a temporary reduction in your monthly Social Security paycheck.

Now, the positive

Your monthly Social Security benefit is calculated based on your 35 highest-paid years in the workforce. But income you earn during retirement might count toward that calculation in a positive way.

Let’s say you retired at age 62 and took Social Security right away, but at that point, you only had a 34-year work history. If you go back to work this year at, say, age 64, your wages from your job will count toward your monthly Social Security benefit. And since you’ll be replacing a year of no earnings with some amount of wages, your monthly benefit might rise.

Know what to anticipate

There are plenty of good reasons to return to work as a retiree. If it’s the route you wish to take, read up on how it might impact your Social Security benefits so you’ll know exactly what to expect.

Remember, if you don’t want to risk having benefits withheld, one approach is to join the gig economy, where you might have more flexibility and control over your income. If you find a job where you set your own hours, you can intentionally stay below the earnings-test limit with relative ease so you’re able to continue getting your full monthly Social Security check.

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