What is Full Retirement Age?
Your full retirement age (FRA) is the age at which you become entitled to receive your full, unreduced Social Security retirement benefits. The FRA is not the same for everyone; it depends on the year you were born. For those born in 1960 or later, the FRA is 67. The age gradually increases for those born between 1943 and 1960. Knowing your specific FRA is the most important factor in determining how working will affect your benefits.
Working Before Full Retirement Age
If you are retired and receiving Social Security benefits but have not yet reached your FRA, your earnings are subject to an annual limit. This limit changes each year. For 2025, if you are under FRA for the entire year, the annual earnings limit is $23,400. For every $2 you earn above this limit, the Social Security Administration (SSA) will deduct $1 from your benefits. This deduction is temporary; the withheld benefits are not lost forever. When you reach FRA, the SSA will recalculate your monthly benefit amount to give you credit for the benefits that were withheld due to your earnings.
The Year You Reach Full Retirement Age
The rules are slightly different for the calendar year you reach your FRA. For 2025, the earnings limit for the months before you reach your FRA is $62,160. During this period, the SSA will deduct $1 from your benefits for every $3 you earn above the limit. This higher limit provides a transition period as you approach your FRA. Beginning with the month of your birthday, the earnings limit no longer applies.
Working at or After Full Retirement Age
Once you reach your FRA, there are no longer any limits on how much you can earn. You can work as many hours as you want and collect your full Social Security benefits without any deductions. Continuing to work past your FRA can be financially beneficial in several ways:
- Higher Future Benefits: As long as you continue to work, you and your employer will continue to pay Social Security taxes. The SSA automatically reviews your earnings record each year and may increase your monthly benefit if your latest year's earnings are one of your 35 highest-earning years.
- Accumulating Savings: Working longer allows you to continue contributing to retirement accounts, like 401(k)s and IRAs. You can also take advantage of "catch-up" contributions if you are 50 or older, further boosting your savings.
Earned vs. Unearned Income
When it comes to the Social Security earnings limit, not all income is treated equally. It is important to distinguish between earned and unearned income.
- Earned Income: This is the income that counts toward the annual earnings limit. It includes wages from a job, net earnings from self-employment, bonuses, and vacation pay.
- Unearned Income: This income does not count toward the earnings limit and will not affect your benefits. Examples include pensions, annuities, investment income (like interest and dividends), and capital gains.
Impact on Taxes
Working while retired can also affect the amount of federal income tax you pay on your Social Security benefits. The amount of benefits that are taxable depends on your "combined income," which is your adjusted gross income plus any nontaxable interest and half of your Social Security benefits.
- Combined Income Thresholds: For a single filer, if your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If your combined income is over $34,000, up to 85% of your benefits may be taxable.
- Married Filing Jointly Thresholds: For married couples filing jointly, these thresholds are $32,000 and $44,000, respectively.
Comparison of Rules and Impact on Earnings
| Feature | Before Full Retirement Age | In the Year You Reach FRA | After Full Retirement Age |
|---|---|---|---|
| Earnings Limit (2025) | $23,400 | $62,160 (before FRA month) | No Limit |
| Benefit Reduction | $1 for every $2 earned over limit | $1 for every $3 earned over limit | None |
| Benefits Withheld | Recalculated and repaid later | Recalculated and repaid later | N/A |
| Tax Impact | Higher income can lead to taxable benefits | Higher income can lead to taxable benefits | Higher income can lead to taxable benefits |
| Benefit Recalculation | Yes, at FRA | Yes, at FRA | Annually, if working increases lifetime average |
Impact on Other Benefits
Beyond Social Security, working in retirement can affect other benefits you may receive. Some private company or state-run pension plans may have their own specific rules and earnings limitations. Public sector pensions, for example, often have stricter rules on re-employment with a public employer. It is crucial to consult with your former employer or plan administrator to understand any restrictions. Additionally, extra income from work could increase your Medicare premiums if your modified adjusted gross income exceeds certain thresholds.
Common Jobs for Working Seniors
Many seniors choose to work part-time in retirement to stay active, earn extra money, or pursue a passion. Some popular options include:
- Retail Sales Associate: Offers flexible hours and social interaction, often in a less physically demanding environment.
- Tutor or Teacher's Aide: Those with prior teaching experience or expertise can help students of all ages.
- Customer Service Representative: Many companies offer remote or flexible positions.
- Driver: Whether for a ride-sharing service, food delivery, or local non-profits, this offers flexibility.
- Bookkeeper or Tax Preparer: Utilizes professional skills acquired over a career.
Final Considerations
Deciding to work in retirement is a personal choice with financial, social, and personal well-being implications. Staying informed about the rules and understanding how they apply to your specific situation is key to making the most of your retirement years. Consulting with a financial advisor can also help you navigate the complexities and plan a strategy that best suits your goals.
For more detailed information, consider visiting the official Social Security Administration website: www.ssa.gov.
Conclusion
While there is no specific hour limit on how much you can work in retirement, your age is the primary factor that determines whether your earnings will affect your Social Security benefits. After reaching your full retirement age, you can work as much as you like without any benefit reduction. Before full retirement age, you are subject to an annual earnings limit, but any benefits withheld are not lost and will be repaid later. Understanding these rules allows you to make informed decisions and enjoy a financially secure and active retirement.
