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Retirement doesn't necessarily mean the end of earning a paycheck. In fact, a growing number of Americans are choosing to work beyond traditional retirement age. According to the U.S. Bureau of Labor Statistics, 19.1% of Americans age 65 and older participated in the labor force in 2025, up from 12.9% in 2000. Some enjoy the social interaction and sense of purpose that work provides, while others appreciate the opportunity to supplement their income or pursue a passion project.
However, returning to work after retirement can affect more than your bank account. Additional earnings may influence your:
Understanding these potential impacts can help you make informed decisions about working during retirement.
One of the first factors to consider is your full retirement age (FRA), which is the age at which you're eligible to receive 100% of your Social Security retirement benefit. For most current retirees, FRA falls between ages 66 and 67, depending on their birth year.
If you've already reached full retirement age, you can earn as much as you want without reducing Social Security benefits.
The situation is different for retirees who claim Social Security early and continue working. If your earnings exceed annual limits established by the Social Security Administration, a portion of your Social Security benefits may be temporarily withheld.
The good news is that these benefits aren't permanently lost. Once you reach full retirement age, the Social Security Administration recalculates your benefits to account for previously withheld amounts.
In some cases, working longer can actually increase your future benefit. Social Security calculates benefits using your highest-earning years, so replacing lower-income years with higher-income years may boost your monthly payments.
If you want to see how potential earnings will impact your Social Security benefits, you can input your data into the Social Security Administration's retirement earnings test calculator.
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Watch NowMany retirees are surprised to discover that earning income after retirement can affect their taxes. Additional earnings may increase your taxable income, potentially pushing you into a higher federal tax bracket, causing a portion of your Social Security benefits to become taxable. The following can all contribute to your overall tax liability:
Retirees who start a business or work as independent contractors should also be aware of self-employment taxes. While traditional employees split Social Security and Medicare payroll taxes with their employers, self-employed workers are generally responsible for paying both portions themselves.
Even modest amounts of earned income can affect your overall tax picture, making tax planning an important part of any post-retirement employment strategy.
Higher income can also affect healthcare costs. Working after retirement increases your Modified Adjusted Gross Income (MAGI). Medicare looks at your MAGI from two years ago to determine your premium costs. If your employment wages plus other retirement income like 401(k)s exceed certain thresholds, you may be required to pay an Income-Related Monthly Adjustment Amount (IRMAA), which increases your monthly Medicare premiums.
Working during retirement can also create new opportunities to strengthen your financial position. If you have earned income, you may still be eligible to contribute to an IRA and some retirees may gain access to a workplace retirement plan such as a 401(k).
These contributions can provide additional tax advantages and help build a larger financial cushion for future healthcare expenses, travel goals or unexpected costs.
Where should you look to find a reputable Certified Financial Planner (CFP), and what questions should you ask?
Get AnswersBefore returning to work, consider speaking with a tax professional or Certified Financial Planner (CFP) who can help you understand how additional income may affect your tax bracket and overall retirement strategy. They can also help determine whether working will improve your long-term financial outlook and identify strategies to minimize unintended financial consequences.
Whether you're considering a part-time job, consulting work or a brand-new career, understanding the financial implications can help you maximize the benefits of working while protecting your long-term retirement security. With careful planning, a second act in your career can support both your financial goals and your desired lifestyle.
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Join Today!Many retirees continue working for the social connection, sense of purpose and extra income it provides. According to the U.S. Bureau of Labor Statistics, 19.1% of Americans aged 65 and older participated in the labor force in 2025, up from 12.9% in 2000.
It depends on your age. If you've reached your full retirement age (FRA)—typically between 66 and 67—you can earn as much as you want without reducing your benefits. If you claim Social Security early and continue working, benefits may be temporarily withheld if your earnings exceed annual limits. Once you reach FRA, the Social Security Administration recalculates your benefits to account for any withheld amounts. In some cases, working longer can actually increase your monthly payments.
It could. Additional income—from wages, self-employment, pension payments, investment earnings or retirement account withdrawals—may push you into a higher federal tax bracket and cause a portion of your Social Security benefits to become taxable. If you work as an independent contractor or run a business, you'll also be responsible for paying both portions of Social Security and Medicare payroll taxes yourself.
Yes. Medicare uses your Modified Adjusted Gross Income (MAGI) from two years prior to determine your premium costs. If your total income exceeds certain thresholds, you may be required to pay an Income-Related Monthly Adjustment Amount (IRMAA), which increases your monthly Medicare premiums.
Absolutely. Earned income may make you eligible to contribute to an IRA or a workplace retirement plan like a 401(k), providing additional tax advantages and helping you build a larger financial cushion for healthcare costs, travel or unexpected expenses.
Speak with a tax professional or Certified Financial Planner (CFP) before making any decisions. They can help you understand how additional income affects your tax bracket and retirement strategy, identify ways to minimize unintended financial consequences and ensure that working supports both your financial goals and desired lifestyle.
expect something more
AAA’s savings products and services can help you simplify your finances and be more confident about your money.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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