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Working in retirement

Key Points

  • Working after retirement may provide benefits beyond income.
  • You may be able to increase your Social Security benefit payment.
  • Pension payments are not affected by working for a new employer.

Being retired doesn't mean that you have to stop working. You may find satisfaction in having a job that really suits your interests, even if it doesn't pay as much as you previously earned. Continuing to work can also help you stay active and connected.

There are financial advantages as well. By earning money, you can rely less on your savings. You also may be eligible for valuable medical benefits through your job and even be able to continue tax-deferred contributions to an IRA or workplace retirement plan.

Working while collecting Social Security

If your Social Security benefits are your only source of income, they are generally not taxed by the federal government. However, if you work while receiving Social Security, or receive income from other sources (such as wages, pensions, annuities or investments), part of your Social Security benefits may be taxable.

Social Security benefits are subject to tax if the person’s combined income (including tax exempt interest) exceeds certain limits. Up to 85% of Social Security benefits can be taxed.

In addition, if you work after retirement and you start receiving Social Security benefits, your monthly payments may be affected, depending on your age.

The key is how close you are to full retirement age, which varies from 66 to 67 depending on the year of your birth. For people born 1943 to 1954, the full retirement age is 66, and it's 67 for people born in 1960 or after. You can find your full retirement age at

How does income affect Social Security payments? 

If you begin Social Security when you are…

In the years before you reach full retirement age In the year you turn full retirement age Older than full retirement age
$1 is deducted from your benefits for every $2 you earn above the annual earnings1 limit $1 is deducted from your benefits for every $3 you earn over the limit No limit on earnings1
Annual earnings limit: $18,960 in 2021 Only applies to earningsfor months prior to turning full retirement age You receive credit for the earnings, which may increase your Social Security benefits in the future
  Annual earnings limit: $52,520 in 2021  
1 Earnings include salaries, bonuses, vacation pay and commissions, but not pensions, annuities, interest and investment income or veterans or other government or military retirement benefits, which do not affect your Social Security benefit.

If you retire during a year in which you have already earned more than the yearly earnings limit, you may receive a full Social Security check for any whole month you are considered retired (with limited earnings and not performing substantial services in self-employment), regardless of earnings prior to retirement.

When to begin collecting Social Security

Many people assume they must begin taking Social Security as soon as they retire, but that's not the case. The longer you wait, the more each payment may be. If you are healthy and don't need the income right away, it may be wise to delay as long as you can up to age 70. In addition, if you are working after retirement age, you are still accumulating benefits (and perhaps earning delayed retirement credits), which may increase your payment amount when you do start taking Social Security.

Ultimately, you have to decide whether it's better to begin receiving smaller Social Security benefits at an earlier age, or to wait to collect larger monthly benefits. The answer depends on your particular situation, including your need for current income, your health and whether you intend to work in retirement.

You also should consider your future financial obligations, possible sources of income (such as an annuity or inheritance) and how long you expect to live. If you are married, it's wise to determine which type of payment you should take when your spouse passes away. Your Ameriprise financial advisor can help you weigh these factors and come to a decision that suits your needs.

Collecting a pension while still working

If you work for a new employer while collecting a pension from a previous employer, your pension will not be affected by your earnings. However, if you work for the same employer from whom you are collecting a pension, the situation may be different.

Some retirement plans let you start collecting a full pension at the retirement age defined by the plan, even if you continue to work for that company. Other plans suspend your pension payments for the time you are working; they may or may not offer increased payments when you finally retire. These distinctions can be important in determining whether continuing to work is financially worthwhile.

"Phased retirement" is another possibility offered by some retirement plans. This arrangement allows you to work part-time, as early as age 62, while collecting some or all of your pension benefit. Depending on the plan, your employer may continue to provide medical benefits for you as well. However, if your pension amount is based on the earnings in your final years of work, switching to part-time could lower your pension payments.

Should you work in retirement

There are many factors to consider when deciding whether to work during retirement. An Ameriprise financial advisor can help you determine when to begin taking Social Security, and even work with your employer's HR department to determine the impact of company policies.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Ameriprise Financial Services, LLC. Member FINRA and SIPC.