Retirement doesn’t always mean stop working—it often means working differently. Whether it’s for extra income, purpose, or just to stay busy, many retirees are choosing part-time work over full-time rest. But even a modest paycheck can bring unexpected consequences for your taxes and benefits. If you’re thinking about picking up work after retirement, here’s what that decision could mean for your bottom line.
Why Post-Retirement Work Is Becoming the Norm
More people are choosing to “semi-retire” by staying active in the workforce while collecting retirement benefits. It’s not just about the money—though that certainly helps—it’s also about staying mentally sharp, socially connected, and feeling useful. The good news is that part-time income can add flexibility to your retirement budget. The less-good news? It can complicate your taxes and impact how much you receive from Social Security and Medicare.
Social Security and the Earnings Test
If you’re under full retirement age (FRA) and you’re collecting Social Security benefits and earning income from a job, you could see your benefits reduced temporarily. This is called the Earnings Test.
In 2025, if you’re under FRA, you can earn up to $22,320 before any impact kicks in. Beyond that, your Social Security benefits are reduced by $1 for every $2 you earn over the limit. The rules shift during the year you reach full retirement age—you can earn up to $59,520, and only $1 is withheld for every $3 earned.
But here’s the key: once you hit FRA, there’s no limit to how much you can earn, and your benefits are no longer reduced. Any amount that was withheld before FRA is gradually returned through higher monthly payments later.
How Part-Time Income Affects Taxes
Earning part-time income in retirement may push some of your Social Security benefits into taxable territory. Social Security benefits aren’t taxed on their own—but if your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) crosses certain thresholds, a portion becomes taxable.
For single filers:
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Below $25,000: benefits not taxed
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$25,000–$34,000: up to 50% of benefits taxable
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Above $34,000: up to 85% taxable
For married filing jointly:
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Below $32,000: benefits not taxed
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$32,000–$44,000: up to 50% of benefits taxable
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Above $44,000: up to 85% taxable
So even a part-time job that pays $10,000–$15,000 a year could shift your tax picture, especially when combined with withdrawals from retirement accounts or investment income.
Medicare Premiums Could Also Rise
Your Medicare Part B and Part D premiums are income-tested. The higher your modified adjusted gross income (MAGI), the more you might pay in monthly premiums. The government uses a two-year lookback to determine these costs, so your part-time income this year could impact what you pay two years from now.
If your MAGI stays under $103,000 (single) or $206,000 (married) in 2025, you’ll likely pay the standard premium. Cross that line, and you’ll be hit with IRMAA—an income-related monthly adjustment amount.
Even if your work is temporary, a strong earning year can lead to higher Medicare costs down the road.
What Part-Time Work Does (and Doesn’t) Impact Financially
| Factor | Will Part-Time Income Affect It? | What to Watch Out For |
|---|---|---|
| Social Security Benefits | Yes, before full retirement age | Earnings cap may reduce payments temporarily |
| Taxes on Benefits | Yes | More income = more of your benefits taxable |
| Medicare Premiums | Yes (indirectly) | Higher income = higher Part B/D premiums |
| IRA/401(k) Contributions | Possibly (if earned income is eligible) | Can contribute to Traditional or Roth IRAs |
| Required Minimum Distributions (RMDs) | No | Still required from pre-tax retirement accounts |
Can You Still Contribute to Retirement Accounts?
Yes—if your part-time work qualifies as earned income, you can still contribute to certain retirement accounts. For example, if you’re over 50 and earning part-time income, you may still be eligible to contribute up to $7,000 to an IRA in 2025.
If your employer offers a 401(k) plan—even for part-time workers—you may be able to contribute even more, up to $30,500 with catch-up contributions. That’s a great way to reduce taxable income and continue building retirement savings even while drawing benefits.
Just be aware of how contributions and income interact with your overall tax situation, especially if you’re also withdrawing from other retirement accounts.
What to Ask Yourself Before Picking Up Work
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Are you below full retirement age and already receiving Social Security?
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Will the income push you into a higher tax or Medicare premium bracket?
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Will working reduce your ability to qualify for other benefits (like income-based health programs)?
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Can the extra income be directed toward saving, paying off debt, or extending your retirement runway?
Working part-time in retirement can be a smart move—but like most smart moves, it pays to plan ahead. A little income can go a long way, but it can also create ripple effects that shrink your benefits or increase your tax bill if you’re not watching closely.
Wrapping It Up: Work Wisely, Not Just More
Retirement doesn’t have to be all or nothing. Working part-time can boost your income, give your days more structure, and stretch your nest egg further. But before you take that job, take stock of what it means for your tax bill, Social Security check, and Medicare costs.
With a bit of strategy, you can work just enough to enhance your retirement—without creating headaches at tax time.
