Retirement is no longer the end of the line for many people. Increasingly, retirees are heading back into the workforce, a trend called “unretirement.” Why are they coming out of retirement? For some, their savings aren’t enough to keep up with rising living costs or unexpected expenses.
For others, the need for a daily routine or social interaction drives them to return to work. Additionally, changes in health or family situations can also play a part. Although retirement sounds appealing, there are various reasons why some people decide to delay or return from retirement.
Returning to work can provide financial benefits and keep retirees socially engaged. But, before making that decision, it’s important to understand how this might affect Social Security benefits. If you’ve already started receiving benefits, your decision to return to work could change the amount you receive, depending on how much you earn and how old you are.
There’s also the option of “withdrawal of application,” which allows you to withdraw your Social Security benefits within the first 12 months. Understanding these options will help you navigate unretirement in a way that aligns with your financial goals.
Earning Limit for Unretiring
Most people who return to work do so before they reach full retirement age (FRA). It’s crucial to understand that the Social Security Administration (SSA) applies an earnings test to those who are not yet retired. This test determines how much of your Social Security benefits will be temporarily reduced if your income exceeds certain limits. As of 2025, if you are below the FRA, your annual earnings limit is set at $23,400. If you make more than that, the SSA will withhold $1 from your Social Security benefits for every $2 you earn above the threshold.
For example, if your income is $27,400, you’ve exceeded the limit by $4,000. As a result, $2,000 will be deducted from your benefits. Once you reach FRA, the SSA recalculates your benefits based on the money that was withheld.
This means you’ll gradually get back the amount deducted, in the form of higher monthly payments. For the year you reach FRA, the earnings limit rises to $62,160. At that point, the SSA will withhold $1 for every $3 you earn above the limit. Some unretired individuals are fine with the temporary reduction, as the extra income helps them financially. Others may prefer to adjust their working hours to stay under the limit.
Earnings After Reaching Full Retirement Age
Reaching FRA, which is 66 or 67, depending on your birth year, is a key moment for retirees considering unretirement. Once you hit FRA, Social Security will no longer reduce your benefits due to additional income. This makes returning to work after FRA a more appealing choice for many retirees, as it offers the flexibility to earn more without penalties. In fact, working after FRA can increase your Social Security benefits in some cases.
If your earnings after returning to work are among the highest of your career, the SSA will recalculate your benefits to reflect this new income. Social Security benefits are based on your highest 35 years of earnings, so if you earn more during your unretirement years, you could receive a higher monthly benefit. There are no penalties on your earnings, which allows retirees to combine income from both work and Social Security for a more secure financial future.
However, it’s important to consider how increased income might affect other financial aspects, such as taxes. If your combined income exceeds certain thresholds, part of your Social Security benefits may become taxable. Proper financial planning is essential, and consulting with a financial advisor can help you make informed decisions.
Option to Withdraw Social Security
If you’ve already started receiving Social Security benefits but have second thoughts and decide to return to work, the SSA gives you a one-time opportunity to change your mind. This is called the “withdrawal of application,” and it allows you to withdraw your Social Security benefits within the first 12 months of receiving them. However, there are a few important rules to consider. First, this option only applies to your first claim for benefits.
To take advantage of this option, you must repay all the benefits you’ve received, including any payments to your family based on your work record, as well as Medicare premiums deducted from your Social Security payments.
Once you’ve repaid the amounts, you can restart your benefits at a later time. For those who claimed Social Security early and are now unretiring, withdrawing your initial claim and reapplying later could result in higher benefits in the future. If this process seems complicated, it’s a good idea to consult a financial advisor.
Delaying Social Security While Working
Another strategy to consider when returning to work is delaying your Social Security benefits while you continue to earn income. This can be a great way to increase your future Social Security payments. Social Security rewards those who wait, boosting their monthly benefits by about 8% for each year they delay their claim, up until age 70.
For example, if your monthly benefit at FRA is $2,000, waiting until you’re 70 could increase your monthly payment to $2,640. That’s a significant increase that can add up over time. Continuing to work also allows you to contribute more to your retirement savings, such as a 401(k) or an IRA.
If you unretire and earn more than in previous years, the SSA may recalculate your benefits to reflect your higher lifetime earnings. This approach is particularly beneficial if you are in good health and expect to live longer than average.
You’ll enjoy the benefits of the higher monthly payments for many years. However, delaying Social Security may not be the right choice for everyone. If you need immediate income to cover essential expenses, it might be better to start receiving benefits earlier. Carefully weigh the pros and cons of delaying your Social Security claim.
Remember that returning to work can increase your income, which may push you into a higher tax bracket. This could result in up to 85% of your Social Security benefits being taxable. Additionally, higher earnings may lead to higher Medicare premiums. These premiums are based on your modified adjusted gross income (MAGI), so it’s important to consider the potential impact on your overall finances.
Conclusion
Unretirement can be a smart move for retirees who want to increase their income and stay engaged with others. However, before heading back to work, it’s crucial to understand how it may affect your Social Security benefits.
Whether you’re considering the earnings limit, withdrawing your application, or delaying your benefits, it’s essential to make informed decisions that align with your long-term financial goals. Consulting a financial advisor can help you navigate the complex rules of Social Security and ensure that unretirement works in your favor.
Disclaimer: This article has been meticulously fact-checked by our team to ensure accuracy and uphold transparency. We strive to deliver trustworthy and dependable content to our readers.
