Working a job while being retired may seem like a bit of a redundant move since retirement is meant to be a time for you to relax and unwind after a lifetime of career progression. Simply unwinding by the seaside or spending your time doing nothing may once you retire may not always be an option for some seniors, however.
Some retirees may decide to take up a job gain to fill the time, while others may be doing it out of necessity. The circumstances that lead retirees to working during their retirement will naturally differ from one person to the next. The commonality in all of this is, however, the importance of knowing how an additional source of income will impact your Social Security benefit income. Here is what you need to know.
How are Social Security benefits claimed?
In order to become eligible for Social Security benefits, you will need to have earned a minimum of 40 work credits. Each year while you are working, you can earn a maximum of 4 work credits, which is earned by paying a percentage of your earnings into the dedicated Social Security payroll tax.
The amount you receive in benefits is largely determined in relation to your lifetime earnings, however, the age at which you claim also plays an important role. This is because of the policy of the Full Retirement Age, which is the age at which you become eligible to claim your full benefits. Full retirement ages will differ from person to person as it depends on your year of birth. When the Social Security program was initially started, the retirement age was 65, however, in order to preserve the financial health of the program and account for growing life expectancy, it was amended to increase gradually until it reaches 67.
As such in 2025, the full retirement age increased to 66 years and 10 months for those born in 1959. In 2026, it will increase to 67 years for those born in 1960 and later and following this, the retirement age will no longer increase.
Earn more and keep more of your benefits in 2026
Claiming benefits before you reach full retirement age will result in a reduction of up to 30%. Another factor that could reduce your benefits is the income you earn while claiming benefits, however, this reduction is temporary and only applies if you have not yet reached full retirement age.
If you work while claiming Social Security benefits, you will be subject to a retirement earnings test. There are certain income limit in place and if your supplementary income does not exceed these limits, your benefits will remain unreduced. If, however, you have not yet reached full retirement age while claiming and your income is higher than the retirement earnings test limit, your Social Security benefit will be subject to a reduction.
The earnings limit changes annually and for 2025, the limit is $23,400 for those who have not reached full retirement age and will not do so for the full year. If your earnings exceed this figure, for every $2 you earn above the limit, you will lose $1 in benefits.
If you have not reached full retirement age but will do so within the year, the earnings limit is $62,160 and for every $3 you earn above this limit, you will lose $1 in benefits. In 2026, both of these limits are projected to increase thereby allowing retirees to keep more of their benefits if they are earning incomes at the current thresholds.
The official earnings limit figures for 2026 will be revealed alongside the COLA announcement on October 24th. However, current projections have revealed that the $23,400 limit will increase to $24,360, and the $62,160 limit will increase to $64,800. This means that retirees who will not reach full retirement age in the year can earn about $960 more before their benefits are cut, and those reaching full retirement age within the year can earn approximately $2,640 more.