Here Is How A Part-Time Job Might Affect The Income Of A Retiree

Obtaining a second job to supplement income might have unexpected surprises. Seniors in the United States face a double whammy. Inflation has diminished their purchasing power, and this past year’s terrible stock market has significantly diminished their retirement savings. Since the beginning of the year, individual retirement savings and 401(k)s have lost a total of $3,3 trillion in value, according to the Boston College Center for Retirement Research.

As a result, many seniors will be motivated to supplement their principal career or another source of income with a second job. Alignable, a networking platform for small companies, discovered in an August poll that among U.S. citizens 62 and older, 51% reported earning between $1,000 and $5,000 per month from side employment, while 16% reported earning between $5,100 and $20,000 per month.

But while a second job might provide more money, many seniors are unaware of the frequent problems that come with it, such as the possibility of paying higher taxes or losing benefits.

“Many retirees lose their heads over this,” says Elliot Dole, a money adviser with the St. Louis-based Buckingham Group. “It comes as quite a surprise.”

Here is the pertinent information.


If you’ve recently begun working for yourself, you will likely be affected most by taxes. The Internal Revenue Service must be notified of wage income, and Social Security and Medicare taxes must be withheld. Even if you’re employed by someone else, if you have a job where no taxes are withheld, you might be in for a rude awakening come tax season.

Estimated quarterly tax payments are an excellent starting point, and the IRS might apply fines if advance payments are not paid. Tax experts recommend setting away 20% to 35% of cash flow in a separate account to help offset taxes and other company expenditures.

Former advertising executive Terri Heimann Oppenheimer, 61, is now a ghostwriter and editor making around $6,500 per month as a freelancer on Upwork. She says she pays her accountant quarterly for her taxes, and “that takes care of everything.”

Matt Cates, a retired Air Force veteran from Corvallis, Oregon, who earns $2,500 per month producing articles for websites that hire him through Upwork, recommends that self-employed individuals consider their tax obligations when calculating how much to charge customers.

It is also essential to maintain track of all company costs to claim business deductions. In addition to home-office and business expenditure deductions, self-employed individuals can deduct health insurance premiums, including age-based premiums for long-term care coverage.

“This is an often-overlooked way for seniors to save money,” says Matthew Lincoln, a certified financial planner, tax consultant, and enrolled agent in Frederick, Maryland.


Medicare premium increases might be an additional surprise for seniors with supplemental income.

Your monthly premium payments are based on your previous tax year’s income. To calculate your Medicare payments in 2024, your adjusted gross income from this year will be used if you are enrolled in Medicare or will be in two years. In addition, rates might increase by hundreds of dollars if your yearly income exceeds specific thresholds.

If you are filing as an individual with a MAGI (modified adjusted gross income) of $91,000 or less or filing jointly with an income of $182,000 or less, the monthly Medicare Part B premium is $170.10. Part B provides physician and other healthcare professional services, including outpatient and home care. It increases to $238.10 for single taxpayers earning between $91,000 and $114,000 and for joint filers earning between $182,000 and $228,000. And the scales continue to rise from there. Part B premiums rise to $544.30 per month for those with an annual gross income between $170,000 and $500,000 or between $340,000 and $750,000 when filing jointly. Medicare Part D, which covers prescription drugs, may increase comparably.

Mr. Dole, the financial advisor, says he has a client, a 71-year-old retired attorney, who began teaching part-time at an early childhood education facility this year. She will have around $30,000 in earnings at the end of the year.

As a single filer, the customer of Mr. Dole will see her monthly Medicare costs increase from $340 to $440 due to her increased income. He predicts that her premiums will increase to $544 in 2025, two years after she begins drawing minimum payments from her retirement account. Mr. Dole adds, “it was the calm before the storm” since she paid nearly no tax during those extremely low-income years after she retired.

Security Benefits

For many older Americans, having a second job allows them to delay receiving Social Security payments. Benefits grow by 8% each year for each year a recipient waits over the full retirement age, up to the age of 70.

Some are unable or unwilling to wait. At age 62, it is feasible to begin collecting benefits. You can also continue working once you begin receiving benefits.

Nonetheless, this is vital: Before and during the year you reach FRA (full retirement age), your Social Security payments may be decreased if your anticipated income exceeds certain thresholds. In 2024, payments were reduced by $1 for every $2 exceeding $19,560 earned in 2020. When you reach full retirement age, $1 is withheld for every $3 you earn above $51,960. After full retirement age, however, you get full Social Security payments regardless of your income.

Matthew Allen, CEO of Social Security Advisors, a New York-based advice business that helps customers optimize their Social Security benefits, notes that an increasing number of individuals are pondering how to handle the earnings cap.

In August, Cheryl Hinton, 64, retired from her full-time position as a patient-care coordinator at Tampa’s Advent Health. Meanwhile, she has sold antique apparel and items online for over two decades. She believes her side gig has generated between $1,000 and $1,500 monthly over the past year.

Ms. Hinton wants to wait until 2025, when she reaches her full retirement age, to receive her Social Security payments. She does not intend to use her money unless it is an emergency, and she has been able to pay her monthly household costs thus far. 

Mr. Allen states that a reduction in benefits “often surprises” individuals. The Social Security Administration allows you to appeal a decrease in benefits if a life-changing event, such as divorce, death, or loss of employment, has reduced your income since the year used to calculate the decrease.


Opening a SEP IRA or simplified employee pension individual retirement account is one approach to minimize tax shocks and decreases in benefits. These variants of IRAs are employed as retirement savings vehicles by company owners for themselves and their workers.

Creating one does not require a minimum age. A self-employed individual can contribute up to a maximum of $58,000 annually, or 25% of their earning income. Required minimum payouts would begin on April 1 of the year after your 7012th birthday if you were born before July 1, 1949, or your 72nd birthday if you were born after June 30, 1949.