Retirement can be incredibly expensive, and it’s not uncommon for older adults to continue working in some capacity later in life. In fact, a whopping 75% of workers expect to work for pay in retirement, according to a 2024 report from the Employee Benefit Research Institute.

However, working while collecting Social Security can affect your benefit amount. The average working retiree could see their checks slashed by around $239 per month, and depending on your income, most of your benefit could even be withheld. Here’s what to expect heading into 2025.

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How to tell whether your benefits will be cut in retirement

If you continue to earn an income after taking Social Security and you’re under your full retirement age (FRA), your wages will be subject to the retirement earnings-test income limit. When your income surpasses this limit, your benefits will be reduced in the years leading up to your FRA.

To determine whether your benefits will be reduced, you’ll first need to know your exact FRA and your income for the year. Your FRA will depend on your birth year, but it’s between ages 66 and 67 for everyone.

There are two income limits: one for those who will be well below their FRA in 2025 and a second for workers who will reach their FRA in the next year.

Source: Social Security Administration. Table by author.

In 2024, full-time workers age 65 and older earned a median wage of around $58,292 per year, according to data from the Bureau of Labor Statistics. Let’s say, for example, you’re only working part-time in retirement while earning half of that amount, or $29,146 per year.

Let’s also say you’re 65 years old with an FRA of 67. Those figures would subject you to the smaller income limit, since you won’t reach your FRA in 2025. Your income in this case would be $5,746 over the annual limit, reducing your benefits by $2,873 per year, or around $239 per month.

One major silver lining to keep in mind

The more you’re earning in retirement, the more drastic your benefit cuts will be. In extreme cases, you could even have your entire benefit amount withheld. However, the good news is that your benefit will be recalculated at your FRA, and you’ll receive larger checks for the rest of your life.

The retirement-earnings test is designed so that, in theory, you should recoup all of the benefits that were withheld. So while these reductions can be severe in the short term, you’re not actually missing out on anything, assuming you spend a significant amount of time in retirement.

In an example provided by the Social Security Administration, a retiree with a normal benefit amount of $1,000 per month could have their payment reduced to just $655 per month after earnings-test reductions. At that person’s FRA, they will begin receiving new payments of $1,070 per month.

To recoup the total $16,560 that was withheld throughout their four years of work, it would take 20 years of receiving slightly larger payments after FRA. Either way, this worker will receive the same amount in total. But if you have reason to believe you may not spend at least a couple of decades in retirement, there’s a chance you may not recoup all of your benefits that were withheld.

Is it really worth it to work in retirement?

In general, the advantages of working after taking Social Security often outweigh the disadvantages. The short-term benefit reductions can sting, but the income you’re earning from your job may have a bigger impact on your overall budget than the withholdings.

It’s still wise, though, to consider your goals and preferences to make the best decision for your situation. When you know what to expect from the retirement-earnings test, you can decide whether it’s really worthwhile to continue working while on Social Security.

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