“Not retiring” is becoming a popular trend in the retirement world as many older adults return to work after leaving their careers. About 20% of retirees work full or part-time, according to a 2024 survey by investment management firm T. Rowe Price, while 7% say they are currently looking for work.
While 45% of retirees do so for personal reasons, such as being part of a social group, a larger percentage (48%) have returned to work for financial reasons.
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If you recently retired and filed for Social Security benefits, you can still return to work. However, in some situations, you may face significant reductions in your benefits thanks to this one Social Security rule. Here’s everything you need to know.
Depending on your age and wages, your benefits may be partially or even completely withheld if you receive income from a job.
The retirement income test is an income limit that determines whether your benefits will be withheld and, if so, how much your checks will be reduced. This limit only applies to people under full retirement age (FRA), which is 67 for anyone born in 1960 or later. If you are already over this age, you do not have to worry about these discounts, regardless of your income.
If you don’t meet your FRA by 2025, your benefits will be reduced by $1 for every $2 you earn above the $23,400 per year limit. When you reach that age next year, you’ll face a different limit of $62,160 in the months leading up to your FRA, and $1 will be withheld for every $3 over that limit.
|
Age |
Income limit |
Benefit reduction |
|---|---|---|
|
If you don’t meet your FRA by 2025 |
$23,400 per year |
$1 discount for every $2 over the limit |
|
If you get your FRA in 2025 |
$62,160 per year |
$1 discount for every $3 over the limit |
Data source: Social Security Administration.
Depending on your income, you may be faced with significant discounts. For example, let’s say you are 62 years old with an FRA of 67, and you still work full-time and earn $50,000 per year.
In this case, you won’t reach your FRA next year, so your income is subject to the $23,400 annual limit. Your wages are $26,600 above the limit, which means your benefits will be reduced by $13,300 per year, or $1,108 per month.
Fortunately, these cuts won’t last forever. The Social Security Administration will recalculate your benefit at your FRA taking these deductions into account. You will then receive a larger payment to cover any money withheld due to your income.
