Continuing to work past age 67 in the United States can be a financially smart decision or a costly mistake, depending on how much you know about it. The Social Security system has rules that few understand in depth, and these can make a difference of thousands of dollars a year.
It’s not just about when to collect benefits. It’s about taxes, Medicare surcharges, mandatory retirement account distributions, and a new tax deduction that sounds better than it actually works for many.
The first concept to understand is the full retirement age, known as FRA. Currently, it’s 67 for those who will turn 62 in 2026. This is the dividing line that determines virtually everything else. You can start collecting Social Security at 62, but the benefit is reduced.
What Happens to Your Retirement if You Keep Working
Waiting until FRA guarantees 100% of your full benefit. And if you wait beyond 67, the benefit increases by 8 percent for each additional year, up to age 70. Three years of patience can translate into a 24 percent increase in monthly income for life. The maximum possible benefit in 2026, for those who waited until 70, is $5,251 per month.
What not everyone considers is what happens if you want to work and collect benefits simultaneously before reaching FRA. The Social Security Administration applies what’s called the earnings test, an income test that reduces benefits if earnings exceed certain thresholds.
In 2025, the limit for those who haven’t yet reached FRA is $23,400 annually. For every two dollars earned above that ceiling, one dollar of benefits is lost. For those who reach FRA that same year, the limit rises to $62,160, with a lower withholding rate: one dollar for every three dollars over the limit.
The Retirement Money the Government Takes and Gives Back
The somewhat more reassuring news is that these withheld benefits don’t disappear forever. Once you reach FRA, the SSA recalculates them and gradually returns them. Once the FRA is passed, the earnings test disappears. There is no income limit. You can earn as much as you want without affecting your taxable income.
But that’s where another, less visible problem begins: taxes. Continuing to work while collecting Social Security can subject up to 85% of that benefit to federal income tax if a couple’s combined income exceeds $44,000. And wages continue to accrue Social Security and Medicare payroll taxes without exception, even for those already receiving both benefits. In 2026, the income threshold for Social Security taxation is $184,500.
The Medicare Penalty That Hits Hardest Two Years After You Earn Too Much
The most overlooked part of this equation is Medicare. Anyone who decides to delay collecting Social Security beyond age 65 must still enroll in Medicare within three months of their 65th birthday, or they’ll face permanent penalties on their Part B and Part D premiums.
And if income remains high because they’re working, the IRMAA, the Medicare high-income surcharge, comes into play. Starting at $109,000 of modified adjusted gross income for individual filers, or $218,000 for couples, the standard Medicare Part B premium of $202.90 per month begins to increase.
What few people know is that the IRMAA is calculated using data from two years prior. 2024 income determines the 2026 surcharge. Crossing a threshold by just one dollar can mean more than $1,000 extra per year in premiums. For couples where both partners are enrolled in Medicare, that number doubles.
At age 73, another factor comes into play: the required minimum distributions, known as RMDs, from tax-deferred retirement accounts such as traditional IRAs and former employer plans. These distributions are added to wages and Social Security benefits, increasing total income and pushing taxpayers into higher tax brackets and more burdensome Medicare surcharges.
The Trump administration approved an additional deduction of up to $6,000 for people 65 and older, applicable between 2025 and 2028. It sounds like a relief. But it doesn’t reduce MAGI, the number the SSA uses to calculate IRMAA. It’s a below-the-line deduction, not an above-the-line deduction, which limits its real impact for those who need it most.
Working beyond retirement can also improve your final Social Security benefit calculation. The system averages your 35 highest-earning years, adjusted for inflation. If those additional years of work result in higher wages than your lowest earnings, your monthly benefit may increase.
