What Happens To Your Social Security Benefits If You 'Unretire'

Retirement isn't always the final chapter these days. Many retirees are jumping back into the workforce, embracing what's known as "unretirement." Why the comeback? Some find their savings don't stretch as far as they thought, thanks to rising prices or surprise bills. Others miss having a daily routine or the social perks of a job. Changes in health or family needs can also lead some to clock back in. This shows that even though kicking back in retirement sounds great, there are solid reasons why some folks end up back at work or delaying retirement.

Jumping back into work can fatten up your wallet and keep you connected with people. But, it's smart to think about how this move might tweak your Social Security benefits. If you've already started dipping into Social Security, going back to work could change things up, depending on how much you earn and how old you are. You could also use a handy option called "withdrawal of application" that is available if it has been less than 12 months since you began receiving Social Security benefits. We will explore this and more as understanding these rules will help ensure that rejoining the workforce supports your financial goals without creating unintended complications.

While most people choose to return to the workforce before they've reached full retirement age (FRA), it's essential to be aware that the Social Security Administration has some sort of earnings test for unretired personnel. This test determines how much of your Social Security benefits would be temporarily reduced, should your income exceed certain thresholds. As of 2025, all individuals within the normal retirement age have their annual earnings limit set at $23,400. Once your earnings exceed this threshold, the Social Security Administration is authorized to make some withholding. This means that for every $2 you earn, they deduct $1 from your Social Security benefits.

For example, if your annual income is $27,400, then you have actively exceeded the earnings limit set by the Administration by a margin of $4,000, $2,000 will be withheld from your benefits. Once you reach your full retirement age, the SSA recalculates all your benefits that were reduced due to the earnings test. The withheld amount will be returned to you gradually, in the form of higher monthly payments. In the year you reach your FRA, the threshold of your earnings increases to $62,160. This means that SSA will now deduct $1 from every $3 you earn above the limit. Some unretired people are not bothered by the temporary reduction in Social Security benefits, as long as they earn the additional income. Meanwhile, others might prefer to adjust their work hours, in order to stay below the threshold.

For retirees considering unretirement, reaching full retirement age (FRA) is a significant milestone. At 66 or 67, which is regarded as the FRA, Social Security will no longer penalize you for any extra income you earn. This makes post-FRA employment a more attractive option for many retirees. The flexibility allows individuals to start new ventures, or explore opportunities they're passionate about. Additionally, returning to work after reaching FRA could increase your Social Security benefits in some cases.

If your income after you unretire turns out to be among the highest of your working years, the SSA will revise what you get paid as benefit to account for your new income. Note that your Social Security benefits rely on your highest 35 years of earnings, which means when you add the high income to the calculation, you can get an increase in your monthly payments. There are no penalties on earnings meaning a retiree can combine income streams — from work and Social Security — to create a stronger financial status that will reduce how much they rely on savings or investments.

The freedom to earn without penalties is clearly an advantage, still, it is wise to review how an increase in income might impact other aspects of your finances like taxes. For instance, if your combined income exceeds certain thresholds, a portion of your Social Security benefits could become taxable. When this happens, use proper financial planning to navigate or consult a professional.

If as a retiree you've started collecting Social Security but then have second thoughts that leads to unretirement, you get a one-time do-over. The SSA lets you withdraw your application through a "withdrawal of application," so you restart your benefits. You can withdraw your Social Security application within the first 12 months of getting benefits. But, it comes with rules you'll want to think over carefully. One is it applies only to your first claim. 

A withdrawal will cancel your initial application and you can restart your benefits later on. Part of this process means you need to pay back all the benefits you received, including any payments your family got based on your work record as well as Medicare premiums deducted from your Social Security checks. Repayment makes sure everything is satisfactory with no leftover overpayments.

Still, restarting your Social Security benefits is a relief for those who are claiming benefits but now find they can work again or have other money coming in. There is another gain. For example, if you unretire after an early claim, you could get higher future benefits when you withdraw an initial claim, pay back what you received, and reapply later. If this is too complex, contact a financial advisor for advice that fits your retirement plans. And since you might only get one shot at this, research beforehand with a financial advisor.

If you unretire and then hold off on Social Security benefits while you keep working, it can be a smart strategy to fatten up your future checks. Putting off your claim until after your full retirement age can really pay off because Social Security rewards those who wait by boosting their monthly benefits. For each year you delay, up to age 70, your payments grow by about 8% in what is called Delayed Retirement Credits.

Say your monthly benefit at full retirement age is $2,000. If you hold off on claiming Social Security until you're 70, you could bump up your checks to $2,640 each month. That's a nice boost that adds up more and more over time. Plus, working a bit longer not only keeps cash flowing in but also lets you pack more into your retirement savings, if you opt for a 401(k) or an IRA.

As noted earlier, if you earn more now than in your earlier working years, your benefits might get recalculated to show off those higher lifetime earnings. This tactic works especially if you're in good health and your family tends to live longer. You'll likely enjoy the benefits of those bigger checks for many years. However, note that delaying Social Security isn't the best choice for everyone. Those who need the income to cover essential living expenses might find it more beneficial to claim benefits earlier. So weigh the pros and cons of this approach carefully.

Going back to work could bump up your income, which might slide you into a higher tax bracket. What's more, this increase in income could make up to 85% of your Social Security benefits taxable. And don't forget about Medicare: if you earn more, you might have to pay higher premiums for Medicare Part B and Part D. These premiums are tied to your modified adjusted gross income (MAGI), so higher earnings could mean higher premiums. Keep an eye on these potential changes so you're not caught off guard. As well as the big changes that might be coming to social security spousal benefits.

If you're thinking about unretiring, take a good look at how it'll shake up your retirement savings strategy. Getting a paycheck again means you might not need to dip into your retirement stash as much, letting those funds grow for later. Plus, if you're eligible, you could even toss some of that salary into a 401(k) or an IRA to beef up your nest egg. But, unretiring isn't just about the extra cash — there are costs too, like travel, work clothes, and professional fees. Crunch the numbers to see if the financial upsides of going back to work really do beat the costs. And don't forget to think about whether this move fits with the life you want and your long-term goals.