Plenty of retirees still work, whether for structure, purpose, or extra cash. That paycheck can be helpful — and it can also ripple through Medicare premiums and how much of Social Security ends up taxed.

Understanding those interactions lets retirees keep more of each dollar and avoid surprises at tax time.

Why work

A side income can reduce portfolio withdrawals and extend savings. Many retirees report that even modest earnings improve confidence and flexibility. The catch: Wages are taxable, and they feed formulas used for Medicare premiums and Social Security taxation. Smart planning integrates hours worked, timing of withdrawals, and filing strategies.

Medicare basics

If age 65 or older and not covered by active employer insurance, Medicare becomes the default. The program comes in parts: Part A for hospital care, Part B for medical services, Part C for medicare advantage and Part D for prescriptions. Working in retirement doesn’t block enrollment, but it may change what you pay for certain parts.

Part A

Most retirees owe no Part A premium. Earning a decade (40 quarters) of Medicare-taxed work — either personally or through a spouse — typically secures premium-free hospital coverage. Continuing to work doesn’t raise that premium; it remains $0 for most enrollees who meet work-credit requirements.

Parts B, C & D

Part B covers medical services and comes with a monthly premium. Many retirees choose Part C (Medicare Advantage) as an optional way to receive Part A and Part B through a Medicare-approved plan; many Part C plans also include Part D prescription coverage. Whether you use Original Medicare (B + D) or a Part C plan, higher earners can pay more through income-related monthly adjustment amounts, known as IRMAA. IRMAA is tied to Part B and prescription coverage, and it’s generally set using your modified adjusted gross income from two years earlier, so premiums can stay elevated for a period even after income drops.

IRMAA: what the lookback can do

Because of the two-year lookback, premiums can stay elevated even after someone stops working. For example, 2026 IRMAA begins above $109,000 (single) or $218,000 (joint) on the lookback return, and the brackets step up from there. Premiums and surcharges are tiered, so exact amounts depend on the specific bracket you land in.

“IRMAA is a step function, not a gradual increase, so even a small income bump can push you into a higher bracket,” states Sean Mullaney, a tax-focused financial planner.

Appealing an IRMAA decision

Income often drops after retirement, but the system may not automatically adjust right away. If you experience a life-changing event such as work stoppage and your income falls, you can request a new determination by filing Form SSA-44 and asking for premiums to be based on more current income rather than the two-year lookback.

Benefit taxation

Social Security has its own tax rules. The IRS calculates “combined” (provisional) income by adding adjusted gross income, tax-exempt interest, and half of Social Security benefits. That figure determines how much of your benefit is taxable at ordinary rates — 0%, up to 50%, or up to 85%.

Key thresholds

Single filers: below $25,000 combined income, benefits aren’t taxed; $25,000–$34,000, up to 50% is taxable; above $34,000, up to 85% is taxable. Married filing jointly: below $32,000, no tax on benefits; $32,000–$44,000, up to 50% is taxable; above $44,000, up to 85% is taxable. These thresholds are longstanding and not indexed.

Work impact

Wages increase combined income and can push more of your benefit into the taxable column. In practice, many middle- and higher-income retirees already sit in the “up to 85% taxable” band, so small amounts of work may not change outcomes much. The bigger effect is often from required distributions, capital gains, or sizable consulting income.

State wrinkles

A handful of states tax some Social Security income, often with deductions or phaseouts that spare many households. Rules vary widely, so confirm how your state treats benefits and whether local thresholds interact with your other retirement income.

New deduction

Beginning with 2025 returns and currently set through 2028, taxpayers age 65+ can claim an additional federal deduction of up to $6,000, subject to income phaseouts. It’s available whether taking the standard deduction or itemizing. This provision can offset some tax from work income in those years.

Smart planning

Coordinate wages with portfolio moves. Consider spacing Roth conversions into lower-income years to avoid triggering IRMAA. If near a surcharge threshold, delaying a large capital gain or adjusting elective withdrawals may keep MAGI under the line. Track municipal-bond interest too; it counts in the Social Security formula even though it’s federally tax-exempt.

Withholding tips

If benefits will be taxable, set up voluntary withholding on Social Security or adjust paycheck and pension withholdings. Proper withholding prevents underpayment penalties and smooths cash flow. For Medicare, remember that any IRMAA is deducted from Social Security checks or billed directly if not yet receiving benefits.

When to get help

High earners and those juggling multiple income sources (consulting, rentals, distributions) benefit from a personalized projection. A fiduciary planner or tax pro can model IRMAA tiers, Social Security taxation, and withdrawal timing so you don’t accidentally trip a costly threshold.

Conclusion

Working in retirement can strengthen finances and provide meaningful structure, but earnings can echo through premium surcharges and benefit taxation. The most effective approach is a coordinated income plan—timing wages, withdrawals, and one-time moves so thresholds aren’t crossed by accident.