Do the math before taking that second job

Photo by Andrea Piacquadio on Pexels

By Donna Fuscaldo
Posted on September 11, 2025

Jim Carrey, Al Pacino and Hugh Grant aren’t the only ones who came out of retirement. Countless people return to the workforce after retiring.

For some, it’s a matter of money — they have savings but are afraid it’s not enough. For others, it’s about their well-being — they are bored and miss the structure and sense of purpose at work.

If you want to join the ranks of the unretired, you may want to consider the impact it will have on your finances before you do. After all, it could cost you more money to reenter the workforce than to stay home.

If you don’t need the money, “just don’t go get a job — run it by a financial professional first,” said Rose Niang, a financial planner at Edelman Financial Engines. “Sometimes the pitfalls may be worse than what you gain from that job.”

From Social Security to taxes, here’s a look at three potentially costly drawbacks of returning to work after you’ve retired.

1. You can lose some of your Social Security

If you started collecting Social Security benefits before your full retirement age (which is 67 for those born in 1960 or later) and then return to work, your benefits could be reduced.

This rule is known as the earnings test, and the Social Security Administration applies it to anyone who is working and receiving benefits before their full retirement age.

For every $2 you make over $23,400 for 2025, $1 of your Social Security benefits will be deducted. If you hit full retirement age in 2025, you can earn up to $62,160. For every $3 over that, the SSA will deduct $1. Once you reach your full retirement age, there is no earnings limit. Your Social Security benefits will go back to normal if you stop working.

“It’s not the worst thing in the world if you are getting some income,” said Judith Ward, thought leadership director at T. Rowe Price. “Just be aware that if you are taking Social Security and you’re not at your full retirement age, you might see a reduction.”

2. Medicare premiums could increase

This applies to people age 65 and older on Medicare thinking of returning to work. If you receive any government subsidies and make more than a certain limit, you may lose some of those discounts, Niang said.

If you don’t receive government subsidies but make too much money when you return to work, you have to worry about the Income-Related Monthly Adjustment Amount, or IRMAA.

IRMAA is an extra charge added to the monthly premiums for Medicare Part B and Part D if your modified adjusted gross income (MAGI) from the two prior years exceeds certain limits.

For 2025, your MAGI has to exceed $106,000 as a single filer and $212,000 as a couple. The extra expense for 2025 can range from $888 to $5,326.80 per year for Medicare Part B, and $164.40 to $1029.60 for Medicare Part D, depending on how much your income exceeds the threshold.

Your job alone may not push you over the threshold, but pensions, dividend-paying investments, capital gains and required minimum distributions are all part of your MAGI. The income may outweigh the increase in premiums, but you won’t know until you do the math.

3. Tax bracket creep

Making more money means you have to pay more taxes, and it’s just not income taxes. Depending on what tax bracket you end up in, you could owe more on your SS benefits, Niang said.

If you make between $25,000 and $34,000 as an individual or $32,000 to $44,000 married filing jointly, up to 50% of your SS benefits may be taxed. Over $34,000 for individuals and $44,000 for married couples filing jointly and up to 85% of your SS benefits may be taxed.

Plus, the higher income tax bracket you are in, the more you’ll owe Uncle Sam come tax time.

“If you need the money, chances are you are not as concerned about these pitfalls,” Ward said. “If you don’t need the money and like the work and the income is a bonus, these are things you might want to be aware of.”

Find the right balance

Ultimately, it’s all about balance. Nobody is telling you not to return to work, but if you are doing it out of boredom, you have to weigh the costs against the gains.

“Run the numbers before you accept the job,” Niang said. “Make sure you weigh the upside and the downside.”