Getting a Part-Time Job in Retirement? Beware This Pitfall – The Motley Fool

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Motley Fool Issues Rare “All In” Buy Alert
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Inflation has been soaring this year. And while that’s definitely had an impact on working families, it’s perhaps had an even more drastic impact on retirees.
Many retirees live on a fixed income, and many don’t have much in the way of savings to tap. As such, seniors commonly end up reliant on Social Security to stay afloat.
But if those benefits are your primary or sole source of income, you may find that they just don’t give you the buying power you need to maintain a decent lifestyle. And so you may be thinking about getting a part-time job to supplement your income.
Image source: Getty Images.
Even if money isn’t that tight, you might still be considering a part-time job in retirement so you’ll have something to do with your time, or so that you’re able to get the social interaction you miss in the absence of going to work. But while holding down a job could work to your benefit, there’s one pitfall you’ll need to keep in mind.
The Social Security Administration will allow you to earn money from a job and collect benefits at the same time. And once you reach full retirement age (FRA), you can earn any amount of money without impacting your benefits whatsoever.
But if you’re collecting Social Security and haven’t yet gotten to FRA, you’ll need to be careful if you make the decision to pick up some part-time work. That’s because earnings beyond a certain threshold could cause some of your benefits to get withheld.
Now that threshold is something that changes from year to year. Right now, if you’re not reaching FRA this year, you can earn up to $19,560 without impacting your benefits. But if your wages exceed $19,560, you’ll risk having $1 in Social Security withheld per $2 of earnings.
If you’re reaching FRA this year, that threshold climbs to $51,960, which gives you a lot more leeway to earn money. And beyond that point, you only have $1 in Social Security withheld per $3 of earnings.
Next year, these limits are likely to increase, so you may get more wiggle room come 2023. We should know what they look like in October, which is when the Social Security also announces its annual cost-of-living adjustment.
You should also know that withheld benefits aren’t forfeited permanently. You get that money added back to your Social Security payments once you reach FRA. But if money is tight, and that’s your reason for working part-time, you may not want to see a reduction in your Social Security checks.
Boosting your income with a part-time job could work wonders for your finances, especially at a time when inflation is wreaking so much havoc. But before you apply for a job, make sure you understand the way working might impact your Social Security benefits. And, make sure to keep the above earnings limits in mind.
You may decide to specifically limit your work so as not to risk having benefits withheld, and that’s not a bad route to take. But you’ll need to be aware of what those limits look like to plan accordingly.

The Motley Fool has a disclosure policy.
Market-beating stocks from our award-winning analyst team.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/17/2022.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.

Market data powered by Xignite.


Leave a Comment