Retirement can be extremely expensive, and it is not uncommon for older adults to continue working in some capacity later in life. In fact, a whopping 75% of workers expect to work for pay after retirement, according to a 2024 report by the Employee Benefit Research Institute.
However, working while collecting Social Security can affect your benefit amount. The average retiree could see their checks cut by about $239 a month, and depending on your income, most of your benefit could even be withheld. Here's what to expect by 2025.
If you continue to earn income after taking Social Security and you are under your full retirement age (FRA), your salary will be subject to the retirement earnings-tested income limit. When your income exceeds this limit, your benefits will be reduced in the years leading up to your ATA.
To determine whether your benefits will be reduced, you will first need to know your exact ATA and income for the year. Your ATA will depend on your year of birth, but it is between the ages of 66 and 67 for everyone.
There are two income limits: one for those who will be well below their HATA in 2025 and the second for workers who will reach their HATA in the next year.
|
Age |
Income Limit in 2025 |
Benefit Reduction |
|---|---|---|
|
Under FRA in 2025 |
$23,400 per year |
$1 off for every $2 earned over the limit |
|
It will reach the Authority in 2025 |
$62,160 per year |
$1 off for every $3 earned over the limit |
Source: Social Security Administration. Table by author.
In 2024, full-time workers age 65 and older earned a median salary of about $58,292 a year, according to data from the Bureau of Labor Statistics. Let's say, for example, you only work part-time after retirement while earning half that amount, or $29,146 a year.
Let's also say you are 65 with a Fire and Rescue Authority of 67. Those figures would mean you will face the lower income limit, as you will not reach your ATA in 2025. Your income in the this case would be $5,746 over the annual limit, reducing your benefits by $2,873 per year, or about $239 per month.
The more you earn in retirement, the more severe your benefit cuts will be. In extreme cases, you could even have your entire benefit amount suspended. However, the good news is that your benefit will be recalculated in your ATA, and you will receive larger checks for the rest of your life.
The retirement earnings test is designed so that, in theory, you should recover all retained benefits. So while these reductions can be serious in the short term, you're not really missing out on anything, assuming you spend a significant amount of time post-retirement.