Why Working Past 65 Changes Your Social Security and Medicare Strategy

Reaching age 65 is a major milestone for older adults, often triggering thoughts of retirement alongside eligibility for Medicare. However, for those who continue working past this age, coordinating Social Security benefits requires careful planning. Because full retirement age is 67 for individuals born in 1960 or later, claiming benefits at 65 while earning a steady salary can lead to reduced monthly payments due to government withholding thresholds.

For individuals below full retirement age, Social Security withholds $1 of benefits for every $2 earned above the predetermined income limit, which is set at $24,480 for 2026. For example, a worker expecting a $2,000 monthly benefit could see those payments significantly reduced if their salary exceeds the threshold. In the year you reach full retirement age, the rules ease slightly, withholding $1 for every $3 above a higher limit of $65,160 in 2026. While withheld money is not permanently lost—the administration recalculates benefits later to provide credits—immediate cash flow can take a substantial hit.

Continuing to work past 65 also presents an opportunity to boost lifetime earnings and maximize retirement income. Delaying benefits allows workers to accumulate delayed retirement credits up until age 70, potentially increasing the eventual payout. Furthermore, higher earners should weigh how additional wage income affects the taxability of their benefits and factor in spousal survival benefits, which are typically based on the higher earner's record.

What to Watch

• Review official Social Security benefit calculators to estimate how continued employment affects your payouts.
• Monitor employer health coverage rules to avoid late enrollment penalties when coordinating with Medicare Part B at age 65.
• Assess whether your current salary can comfortably cover living expenses without needing to tap into Social Security early.

Note: Rules and earnings limits are subject to change. This overview is for informational purposes and does not constitute formal financial or tax advice.