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How Working After Retirement Affects Social Security and Medicare

Posted on July 09, 2025

How Working After Retirement Affects Social Security and Medicare

Retirement doesn't always mean stopping work entirely. Many retirees choose to continue working, either full-time or part-time, for various reasons. Understanding how working after retirement affects your Social Security benefits and Medicare coverage is crucial for maximizing your retirement income and healthcare options. This guide will help you navigate the complexities of working after retirement.

Social Security and Working After Retirement

  1. Earnings Test: If you start receiving Social Security benefits before your full retirement age (FRA) and continue to work, your benefits may be reduced based on your earnings. For 2024, the earnings limit is $19,560. If you earn more than this amount, your benefits will be reduced by $1 for every $2 over the limit. In the year you reach your FRA, the limit increases to $51,960, and your benefits are reduced by $1 for every $3 over the limit. Once you reach your FRA, there are no earnings limits, and you can earn any amount without affecting your Social Security benefits.
  2. Increased Benefits: If your earnings after retirement are higher than your previous highest-earning years, your Social Security benefits may be recalculated and increased. This is because Social Security benefits are based on your highest 35 years of earnings.
  3. Delayed Retirement Credits: If you delay starting your Social Security benefits past your FRA while continuing to work, your benefits will increase due to delayed retirement credits. This can result in higher monthly payments when you eventually start receiving benefits.

Medicare and Working After Retirement

  1. Employer-Sponsored Health Coverage: If you continue working after age 65 and have health coverage through your employer, you may be able to delay enrolling in Medicare Part B without facing late enrollment penalties. You’ll qualify for a Special Enrollment Period (SEP) to sign up for Medicare when your employment ends or your coverage through the employer ends.
  2. Medicare and COBRA: If you have COBRA continuation coverage after leaving your job, you should still enroll in Medicare when you become eligible to avoid penalties. COBRA is not considered credible coverage for delaying Medicare enrollment.
  3. Income-Related Monthly Adjustment Amount (IRMAA): If your earnings from working after retirement are high, you may be subject to higher Medicare premiums through IRMAA. Planning your income sources and distributions can help manage these costs.

Key Considerations for Working After Retirement

  1. Evaluate Your Financial Needs: Assess your financial situation to determine if continuing to work is necessary to meet your retirement goals. Consider how your earnings will impact your Social Security benefits and Medicare costs.
  2. Understand the Earnings Test: Be aware of the earnings limits if you start receiving Social Security benefits before your FRA. Plan your work schedule and income to minimize reductions in your benefits.
  3. Maximize Health Coverage: If you have employer-sponsored health coverage, understand how it coordinates with Medicare. Compare your options to find the best coverage for your needs.
  4. Plan for IRMAA: Be mindful of your income levels to avoid or minimize IRMAA charges. Adjust your income sources and distributions to stay below the IRMAA thresholds if possible.
  5. Seek Professional Guidance: A financial advisor or Social Security expert can provide personalized advice tailored to your situation. They can help you navigate the complexities and make informed decisions.

Strategies for Balancing Work, Social Security, and Medicare

  • Delay Benefits: If you can afford to wait, delaying Social Security benefits until age 70 can significantly increase your monthly payments. This strategy is beneficial if you have other sources of income to cover expenses in the meantime.
  • Enroll in Medicare on Time: Ensure you enroll in Medicare during your Initial Enrollment Period to avoid late penalties. If you have employer coverage, understand the rules for Special Enrollment Periods to avoid penalties.
  • Monitor Earnings: Keep track of your earnings to ensure you stay within the limits if you’re receiving Social Security benefits before your FRA. This will help you avoid reductions in your benefits.
    Compare Health Coverage Options: Evaluate your employer-sponsored health coverage and Medicare plans to find the best options for your needs. Consider costs, provider networks, and additional benefits.
  • Maximize Earnings: If your earnings after retirement are higher than your previous highest-earning years, your Social Security benefits may be recalculated and increased. This can result in higher monthly payments.
  • Manage IRMAA: Be mindful of your income levels to avoid or minimize IRMAA charges. Plan your income sources and distributions to stay below the IRMAA thresholds if possible.

Frequently Asked Questions

Q1: How does working after retirement affect my Social Security benefits? If you start receiving Social Security benefits before your full retirement age (FRA) and continue to work, your benefits may be reduced based on your earnings. Once you reach your FRA, there are no earnings limits, and you can earn any amount without affecting your benefits.

Q2: Can I delay Medicare if I have employer-sponsored health coverage? Yes, if you continue working after age 65 and have health coverage through your employer, you may be able to delay enrolling in Medicare Part B without facing late enrollment penalties. You’ll qualify for a Special Enrollment Period (SEP) to sign up for Medicare when your employment ends.

Q3: What is the Income-Related Monthly Adjustment Amount (IRMAA)? IRMAA is an additional charge on Medicare Part B and Part D premiums for individuals with higher income. Your income from Social Security and other sources determines whether you’ll pay IRMAA. Planning your income distributions can help manage IRMAA charges.

Q4: How does COBRA affect Medicare enrollment? If you have COBRA continuation coverage after leaving your job, you should still enroll in Medicare when you become eligible to avoid penalties. COBRA is not considered credible coverage for delaying Medicare enrollment.

Q5: Is it beneficial to delay both Social Security and Medicare? While delaying Social Security benefits can increase your monthly payments, delaying Medicare is generally not advisable. Delaying Medicare enrollment beyond your Initial Enrollment Period can result in late penalties and higher premiums.

Conclusion

Working after retirement can impact your Social Security benefits and Medicare coverage. By understanding the earnings test, coordinating employer-sponsored health coverage with Medicare, and managing your income to minimize IRMAA charges, you can maximize your retirement income and healthcare options. Consider your unique circumstances, consult with a financial advisor, and plan ahead to ensure a secure and comfortable retirement.

Free Medicare Consultation

Medicare and Social Security are closely related.  Many readers have sought my personal recommendation for a dependable licensed insurance agent as described in my books and on this website. You know, the kind that avoids high-pressure sales, is unbiased in their advice, keeps in touch through the years, and truly aids in navigating the Medicare maze. There are probably agents like this in your hometown, but I certainly don’t know all of them.

If you’re looking for this kind of insurance agent, I’ve got the perfect person: my wife, Niki. The quality of the service I put my name behind means everything to me, and frankly, she’s doing incredible work helping people.
Her agency can assist clients in all but a handful of states, which can be found at BrickhouseAgency.com.

With almost ten years of experience as an independent insurance agent, she embodies the expertise and values I advocate. Niki heads the Brickhouse Agency - a boutique insurance firm. Representing only trusted and fully vetted carriers, her team provides guidance on Medicare insurance options. She also donates 10% of her firm’s annual net profit to charity.

To discuss your Medicare needs or upcoming enrollment, you can: