Coming out of retirement might not have been in your plans, but here you are, suiting back up to reenter the workforce. It can be an anxious time. You're worried about adapting to your new job, and you might also be wondering about how this decision will affect your Social Security benefits.
The bad news is that returning to the workforce could cost you some of your Social Security checks through one of two pathways. The good news is you can anticipate what those losses might look like and take steps to minimize them with the right strategies.
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1. Early claimers could temporarily forfeit some of their checks
The Social Security Administration temporarily withholds benefits from seniors who claim checks under their full retirement age (FRA) -- 67 if you were born in 1960 or later -- and earn more than a certain amount from their jobs. This is known as the Social Security earnings test.
How much you can earn before you lose money to the earnings test depends on your age and the year. In 2026, you lose $1 from your checks for every $2 you earn over $24,480 if you're under your FRA for the whole year. If you'll reach your FRA in 2026, you only lose $1 for every $3 you earn over $65,160 if you earn this much before your birth month.
In some cases, this could wipe out your entire check, so you may need to rely more heavily on income from your job to make ends meet. Or, if you're trying to avoid being subject to the earnings test, you may want to work less so you can stay under these limits.
Money you've lost to the earnings test comes back as a benefit increase when you reach your FRA. After that, you can earn as much as you'd like from your job and the earnings test won't take a penny.
2. The federal government might take a chunk at tax time
Earning money from your job could increase your provisional income, which could put you at risk of owing Social Security benefit taxes. This may just lead to a smaller tax refund, or it could lead to a larger tax bill.
Your provisional income is your adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit. For example, if you earn $50,000 per year from your job and receive $24,000 from Social Security, your provisional income would be $62,000.
The table below illustrates how much of your benefits the government could assess ordinary income taxes on, depending on your provisional income and marital status:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Below: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data source: Social Security Administration.
These numbers don't account for inflation, so as living costs and average benefits rise, it becomes increasingly difficult to avoid these taxes. They could amount to thousands of dollars more per year. Some seniors may also owe state benefit taxes on top of this.
You may be able to avoid this if you can keep your costs low enough. When that's not possible, you'll have to plan for taxes. You can save money for this on your own. An accountant may be able to help you figure out how much to set aside.
Or you can request that the Social Security Administration withhold some money from each check for taxes. You can choose how much you want kept back, and if the government withholds too much, it'll refund the excess with your tax refund.
