Can You Collect a Pension and Still Work Full-Time?

Many retirees return to the workforce to earn extra income or to socialize and make connections. Supplemental retirement income can help cover living expenses, health care, and leisure activities.

Before returning to work, consider how earning income will affect your eligibility for retirement benefits. Pension and income tax laws vary by state. For more information about your pension or disability retirement benefits, talk to a local wage and hour law attorney.

Understanding Pension Collection Rules

You may wonder how returning to work will affect your pension benefits or Social Security. In general, you can still collect your pension and Social Security benefits if you decide to return to work after retirement. However, there are some important factors to consider.

Depending on where you plan to take a new job, there may be limits on how much you can work while still collecting your pension. If you have not yet reached full retirement age, there may be some reductions to your Social Security, depending on how much you make annually. If you are getting disability retirement benefits, returning to work limits benefits.

This article will give an overview of these topics and help point you to further resources for retirement planning.

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Pension Plans and Working After Retirement

A pension plan is a type of retirement plan in which employers pay the retired employee a monthly income for life. The Employee Retirement Income Security Act (ERISA) regulates pension plans, including employer contributions. The Employee Benefits Security Administration is the federal government agency that enforces ERISA.

Factors used to calculate the amount of the pension include:

• Type of plan (defined-benefit or defined-contribution)
• Years of service
• Your maximum salary
• Plan percentage or multiplier
• Your age

Generally, the longer someone works for a company, the greater their monthly pension benefits will be. You may have a couple of different payment options for receiving your benefits. Check your pension retirement account and documents for specific details.

For example, instead of monthly installments, you might be able to get your entire pension amount in a lump sum. Getting all the pension money at once can be beneficial in some circumstances. For others, getting a monthly income will be the best option. If you choose a monthly payment, it’s essential to calculate how much you’ll get per month to decide if returning to work is worthwhile.

Who You Plan to Work For Might Matter

One important factor to consider before returning to work is who you will be working for. If you plan to work for a different employer, there are generally no limits on how much you can work. You can work full-time or part-time if you wish. However, if you plan to return to your past employer, you may have limited work options while still collecting the pension.

If you return to a full-time position with your past employer, your pension payments may stop. However, part-time or contract positions may be exempt from the employer’s pension plan. So if you return as a part-time or contract worker, you may be able to work with your past employer while still collecting your pension.

California employment law attorney Eric Kingsley says the specific rules governing pensions “depend on the language in the pension document.” Review your employer’s policies before making a decision about returning to work with your past employer. If you are unsure about your pension plan provisions, speak with an wage and hour law attorney.

Impacts on Social Security Retirement Benefits

Returning to work after retirement could have a bigger impact on your Social Security benefits. The Social Security Administration (SSA) considers your age and annual earnings to determine your benefit amount.

Full retirement age varies depending on the year you were born. For example, for individuals born between 1943 and 1954, the full retirement age is 66. For individuals born after 1960, the full retirement age is 67. You can check your full retirement age with the SSA’s retirement age calculator.

You can collect Social Security before reaching full retirement age, but there are reductions in your monthly benefits. The other factor is how much you earn each year:

• If you’re under full retirement age for the entire year, the SSA will deduct $1 from your benefit payments for every $2 earned above the annual earnings limit ($23,400 in 2025)
• If you’re under full retirement age for part of the year, the SSA will deduct $1 in benefits for every $3 you earn above a higher limit ($62,160 in 2025)

You can get full Social Security benefits while working with no earning limit if you have reached full retirement age. The SSA will then recalculate your benefit amount, crediting you for any reduced or withheld benefits due to excess earnings.

Your Social Security benefits could be reduced depending on the amount of time you have until retirement and how much you plan to earn. It’s essential to consider this when evaluating whether it’s financially worthwhile to return to work.

Medicare and Income Tax Implications

Workers who are 65 and older get Medicare benefits. Generally, if you return to work and your employer offers health insurance, you can use both Medicare and health benefits together. One plan will act as primary coverage, with the other as secondary coverage.

If you prefer your private health insurance coverage, you can drop Medicare and re-enroll later without penalties. However, you may lose certain protections if you drop Medicare and later re-enroll.

Most retirement system and pension plan income is taxable income. When you return to work, you will increase your taxable income and may have higher federal and state income tax. If you return to self-employed work, you may also have to pay payroll taxes. For IRS tax questions, talk to an income tax lawyer for legal advice.

Finding Legal Help

If you are considering returning to work after retirement and have questions about how work affects your benefits, speak with an employment law attorney. Many lawyers offer a free initial consultation to prospective clients. These consultations allow the attorney to hear the facts of your case and for you to determine if the attorney meets your needs.

Visit the Super Lawyers directory to look for a wage and hour lawyer to help with pension or other employment law questions.