Jan 15, 2025
For many retirees, the thought of returning to work sounds like a lifeline – an opportunity to shore up finances, keep up with inflation, or simply stay active and social.
The Motley Fool surveyed retirees about the 2025 Social Security cost-of-living adjustment (COLA) and found 51% are considering reentering the workforce because their benefits aren’t cutting it. According to a T. Rowe Price study, roughly half (48%) of those working in retirement felt they needed to work for financial reasons, while a similar portion (45%) chose to work for social and emotional benefits.
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But if you’re already collecting Social Security, that decision could come with an unexpected cost: a smaller monthly check.
In fact, depending on your income, you could lose hundreds of dollars each month. So before you punch back in, it’s critical to understand how working in retirement might impact your benefits and whether the trade-offs are worth it.
How much could you lose?
Whether or not your Social Security benefits are reduced depends largely on your age and earnings.
If you’re under your full retirement age (FRA) – 67 for those born in 1960 or later – the Social Security Administration (SSA) imposes an earnings test to determine if your income (only wages or net earnings is self-employed) exceeds certain thresholds. For 2025, that threshold is $23,400.
If your income exceeds this limit, the SSA will deduct $1 from your benefits for every $2 you earn above the threshold. For example, earning $30,000 a year would mean you’re $6,600 over the limit, resulting in a $3,300 reduction in your Social Security benefits for the year. That’s an average of $275 less in your monthly check – significant for retirees relying on fixed incomes.
If you reach full retirement age in 2025, they deduct $1 from your benefits for every $3 you earn above $62,160 until the month you reach full retirement age.
But once you reach your FRA, the earnings test disappears. You can work as much as you’d like without facing reductions in your benefits. Even better, the benefits withheld while you worked are not lost; the SSA recalculates your benefits at FRA to account for any amounts withheld, effectively restoring the lost payments. While the cuts are temporary, they can still create financial challenges in the short term.
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Working while collecting benefits
Despite the potential reductions, there’s a hidden upside to working in retirement: potentially increasing your long-term Social Security benefits.
Social Security benefits are calculated based on your highest 35 years of earnings. If you return to work and your current income replaces lower-earning years in your record, the SSA will automatically adjust your benefits to reflect the higher earnings.
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This adjustment could result in a modest but meaningful increase in your monthly checks, especially if your prior earnings history includes gaps or lower-wage years. For retirees who left the workforce early or earned significantly less earlier in life, unretiring can provide a valuable boost to their long-term benefits.
Is ‘unretiring’ worth it?
The decision to unretire isn’t just about numbers. It’s about balancing the financial, personal, and practical aspects of returning to work.
On the financial side, working provides an obvious benefit: extra income. Whether it’s part-time work to cover daily expenses or a full-time role that adds to your savings, earning additional money can alleviate financial pressures in retirement. For some retirees, it also offers access to employer-sponsored health insurance, potentially reducing out-of-pocket medical expenses.
Beyond the financial perks, working can provide a sense of purpose, structure, and social interaction that many retirees miss. Staying active through work after career retirement can improve mental health, stave off loneliness, and even increase life satisfaction.
But beyond the potential reduction in Social Security benefits, additional income could push you into a higher tax bracket and make your benefits taxable or a bigger part of your benefits taxable. Retirees also risk overcommitting to jobs that take time away from travel, hobbies, or family – the very things they envisioned enjoying during retirement. You may suffer stress on the job, especially if you’re entering a new field, and face a higher risk of injuring yourself if the job is physically demanding.
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Weigh your options
If working as a senior is in your plans, or becomes a necessity, it’s essential to plan carefully.
You can delay claiming Social Security benefits until FRA, to get your full benefits and avoid the earnings test, or even delay until age 70, to maximize your benefits. For every year you wait beyond FRA until age 70, your monthly benefits increase by 8%.
Retirees who plan to work should also explore flexible job opportunities. Part-time or freelance work can provide supplemental income while keeping you below the earnings threshold. This allows you to strike a balance between maintaining your Social Security benefits and earning extra money.
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Chris Clark is a Kansas City–based freelance journalist covering personal finance, housing and retirement. A former Associated Press editor and reporter, he writes plainspoken stories that help readers make smarter financial decisions.
