Although retirement marks the end of a lot of people's careers, that doesn't mean you can't continue to work during it. And the reality is that having a job in retirement could offer a lot of benefit.
For one thing, the extra income might come in handy, whether to help you pay bills or to give you additional spending money for hobbies and leisure. And it never hurts to have extra income for surprise expenses like home repairs.
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Also, working is a great way to keep busy. Some retirees struggle with boredom, so having a job to go to a few times a week could help round out your schedule nicely.
But if you're going to work in retirement, it's important to be aware of certain pitfalls you might run into. Here are three to keep on your radar.
1. Withheld Social Security benefits
If you're collecting Social Security, you should know that you're allowed to have a job while receiving benefits. And once you reach full retirement age, you can earn any amount of money without risking a temporary reduction in your benefits if you continue to work.
However, if you work while on Social Security before having reached full retirement age, you'll be subject to an earnings test. And earning too much could result in having some of your benefits withheld.
In 2025, for every $2 you earn above $23,400, you'll have $1 in Social Security withheld. In 2026, that limit is rising to $24,480.
These limits look different if you started the year off before having reached full retirement age. If you'll be reaching full retirement age in 2025, for every $3 you earn above $62,160, you'll have $1 in Social Security withheld. In 2026, that limit is rising to $65,160.
Withheld Social Security benefits under the earnings test are not forfeited completely. Once you reach full retirement age, you'll get the money back via larger monthly payments. But it's important to understand that in the near term, your Social Security checks might shrink.
2. Increased taxes
You might assume that if you're only working a few hours a week, it won't have a very big impact on your taxes. But actually, you might owe more money by virtue of not just more income, but being pushed into a higher tax bracket.
Also, the more money you earn in retirement, the more you risk surcharges on your Medicare premiums called income-related monthly adjustment amounts, or IRMAAs. It's important to research tax brackets and IRMAA thresholds, since they change from year to year, if you're going to hold down a job.
3. Higher costs
Generally speaking, working is a pretty inexpensive way to stay busy, since you're earning a paycheck rather than spending money on an activity. But there are costs you might incur in the course of having a job that can add up.
For one thing, your job may require certain attire you need to buy and maintain. Secondly, if you were thinking of downsizing from a two-car household to a single car, having a job might make that difficult. But that could mean taking on extra car insurance costs and more.
Make sure to run the numbers, because you don't want your job to secretly be costing you more than you earn if the goal is to boost your income. If the goal is to keep busy, however, then that changes the equation.
All told, working in retirement could be a great way to improve both your income and mental health. Just be aware of the fact that your extra earnings could result in withheld Social Security benefits, higher taxes, and hidden costs.
