Can I work part-time and still withdraw from my retirement accounts?

Executive summary

Yes. You can work part-time and take withdrawals from IRAs or 401(k)s at the same time. The real question is how to do it tax-efficiently. Your plan should account for the Social Security earnings test before full retirement age, required minimum distributions (RMDs), Medicare and ACA rules, and how Roth and traditional accounts are taxed. Done well, part-time work can reduce portfolio withdrawals, extend savings, and keep your options open.

Quick answer: what changes when you earn wages again

• Traditional IRA/401(k) withdrawals remain taxable as ordinary income. Working does not block them.
• Roth IRA withdrawals of contributions are tax-free; earnings are tax-free if you meet the age 59½ and five-year rules.
• RMDs at age 73+ still apply to IRAs. A “still-working” exception may let you delay RMDs from your current employer’s 401(k) if you’re not a 5% owner and your plan allows it. Note that plan terms can require earlier distributions.
• Social Security: before full retirement age, wages and net self-employment income above the annual limit can temporarily reduce monthly benefits; pensions, annuities, IRA withdrawals, and investment income do not count as earnings.
• Healthcare: part-time earnings plus withdrawals raise your modified adjusted gross income (MAGI), which can affect ACA subsidies before 65 and IRMAA surcharges on Medicare at 65+.

Set your objective first

Decide why you’re working part-time in retirement. The reason drives the strategy.

• To reduce portfolio drawdowns: Use wages to replace some withdrawals, keeping you in a lower tax bracket and extending savings.
• To bridge to Social Security: Work can cover expenses so you can delay claiming and lock in a larger benefit later.
• To fund Roth conversions: Conversions are more efficient in low-income years; plan them when work income is modest.
• To stay active: Keep the work light, but still be deliberate about which account you tap for spending.

How withdrawals interact with part-time wages

Traditional accounts: mind the bracket and the sequence

Withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income. Adding wages increases MAGI, which can move you into a higher bracket, increase taxation of Social Security benefits, and trigger Medicare premium surcharges in a future year. When wages are present, you often get more mileage by withdrawing less from traditional accounts and letting tax-deferred money compound.

Roth accounts: flexible, but follow the two five-year rules

Roth IRAs offer valuable flexibility while you work part-time. You can always withdraw your contributions tax- and penalty-free. Earnings are also tax- and penalty-free if the account is at least five tax years old and you’re 59½ or older. Each conversion also has a separate five-year clock for the 10% penalty rule on converted principal taken early. Use Roth funds as a shock absorber in high-income years and replenish them in low-income years if conversions make sense.

Taxable accounts: harvest gains with an eye on brackets

Selling investments from a brokerage account can create capital gains. Long-term gains often face lower rates than ordinary income. Coordinate capital gains with wages and withdrawals to keep your overall tax bill low. If you have losses, you can harvest them to offset gains.

Social Security while you work

For 2025, the earnings test limits are $23,400 if you’re under full retirement age (FRA) all year and $62,160 in the year you reach FRA (limit applies to earnings before the month you reach FRA). SSA withholds $1 for every $2 above the first limit and $1 for every $3 above the second. The test counts wages and net self-employment income only; it does not count pensions, annuities, IRA withdrawals, or investment income. After you reach FRA, there’s no earnings limit, and any benefits withheld earlier raise your future checks.

If you start or stop work midyear, the special monthly rule can pay full benefits for any month you’re “retired,” even if your annual earnings exceed the limit. This helps when shifting into part-time work midyear.

Practical approach

• If wages will exceed the earnings limit, consider delaying your claim until FRA or adjusting hours.
• If you already claimed and your benefit is being withheld, you’re not “losing” it; your benefit is recomputed higher at FRA.

RMDs and the still-working exception

RMDs generally start at age 73 today and are scheduled to shift to age 75 in 2033. IRAs have no work-based delay; you must take IRA RMDs even if employed. For a current employer’s 401(k), plans may allow a delay until you retire if you’re not a 5% owner. Once you separate, RMDs kick in. Plan documents control the details, so verify whether your plan allows the still-working delay and whether in-service withdrawals are permitted.

Roth IRAs have no lifetime RMDs. Starting in 2024, designated Roth accounts in employer plans (Roth 401(k)/403(b)) are also exempt from lifetime RMDs, aligning them with Roth IRAs.

Can I keep contributing while I withdraw?

Often, yes—if you have earned income and your plan allows it.

• IRA contributions: You can contribute at any age if you have earned income. Deductibility depends on income and whether you’re covered by a workplace plan.
• 401(k)/403(b) contributions: If your employer permits part-time participation, you can defer even while taking IRA withdrawals. Standard catch-ups apply after age 50; beginning in 2025, ages 60-63 can contribute the greater of $10,000 (indexed) or 150% of the standard catch-up. The separate rule requiring Roth catch-ups for certain high earners is delayed until 2026.
• HSA contributions: You must have an HSA-eligible health plan and not be enrolled in any part of Medicare. Once Medicare starts, new HSA contributions stop. Enrollment in Part A can be retroactive up to six months, so plan ahead to avoid excess contributions.

Healthcare and MAGI: ACA and Medicare

Before 65 on ACA coverage

ACA premium tax credits are based on MAGI. For ACA purposes, MAGI = AGI + tax-exempt interest + nontaxable Social Security + excluded foreign income. Wages, IRA withdrawals, and Roth conversions can raise your MAGI. A small increase may reduce subsidies. If you’re under 65 and on Marketplace coverage, model the impact of withdrawals and conversions before year-end to avoid surprises.

At 65+ on Medicare

Two years after a higher-income year, you may face IRMAA surcharges for Medicare Parts B and D. For IRMAA, MAGI = AGI + tax-exempt interest (this definition differs from ACA). If a one-time event (e.g., Roth conversion, taxable home sale) spiked your income, you can appeal based on a qualifying life event. Plan large withdrawals with IRMAA brackets in mind.

Common scenarios and smart tactics

Scenario 1: 62-year-old working part-time, not yet claiming Social Security

You earn $24,000 from part-time work. You need $54,000 to live. To fill the $30,000 gap, you could withdraw from a traditional IRA. But that raises MAGI and taxes. Instead, withdraw a smaller amount from the IRA and use Roth contributions or taxable cash to cover the rest. This keeps you in a lower bracket and preserves future tax flexibility. If you plan to claim at 67, today’s work income helps you delay, increasing your monthly benefit later.

Scenario 2: 67-year-old at full retirement age, working seasonally

At FRA, the earnings test goes away. You can work without a Social Security reduction. If you are 67 and hold both Roth and traditional assets, consider drawing enough from the traditional IRA to “top off” your current tax bracket, then meet any extra needs from the Roth. In years when work income is higher, lean more on Roth or taxable accounts; in leaner work years, lean more on traditional withdrawals.

Scenario 3: 74-year-old consultant with IRA RMDs

You must take IRA RMDs regardless of work status. If you also have a current employer 401(k), you might defer RMDs on that plan under the still-working exception if the plan allows it and you’re not a 5% owner. To lower taxes on the IRA RMD you must take, consider making part of it a qualified charitable distribution (QCD) if it fits your giving goals; QCDs can satisfy RMDs and keep those dollars out of taxable income. The QCD limit is $108,000 per person in 2025 (indexed; $105,000 in 2024).

Coordinating income sources: a simple framework

1. Estimate your baseline spending need after part-time wages.
2. Map this year’s tax picture: bracket, Social Security taxation, ACA or IRMAA exposure.
3. Choose the withdrawal mix:
   • Use traditional accounts to “fill up” a favorable bracket you’re already in.
   • Use Roth for flexibility in high-income years or to avoid IRMAA-triggering spikes.
   • Use taxable accounts when long-term capital gains rates are attractive.
4. Apply annual rules: take any required RMDs; check earnings test if before FRA; confirm HSA eligibility.
5. Reassess each fall before year-end to fine-tune conversions, harvesting, and deductions.

Avoid these common mistakes

• Ignoring the earnings test when claiming before FRA, leading to withheld Social Security checks you didn’t expect.
• Forgetting IRA RMDs while still working, assuming the still-working exception applies to IRAs—it does not.
• Triggering IRMAA unintentionally with large year-end withdrawals or conversions.
• Contributing to an HSA after Medicare enrollment, which can cause tax issues—watch for six months of retroactive Part A.
• Missing Roth five-year rules and tapping earnings too soon.

What if I’m under 59½?

You can still work part-time and fund expenses with retirement money, but penalties are a risk. The 10% early-distribution penalty applies unless an exception applies. One common exception is the Rule of 55, which allows penalty-free withdrawals from your current employer’s 401(k)/403(b) if you separate from service in or after the year you turn 55 (age 50 for certain public safety employees). Income tax still applies. Substantially equal periodic payments (72(t)) are another path, but they are rigid and can backfire if mishandled. Proceed carefully.

Documentation and recordkeeping

• Track basis in traditional IRAs if you ever made non-deductible contributions; file Form 8606 when needed.
• Keep Roth timelines: account open date and conversion dates for five-year rule checks.
• Save plan summaries showing whether your 401(k) permits the still-working RMD delay and whether in-service withdrawals are allowed.
• Keep a withdrawal log by account to simplify next year’s planning.

Action checklist

1. Confirm your FRA and check the current year’s earnings limits before you claim.
2. List all required withdrawals this year (IRAs always; current employer plan maybe).
3. Project MAGI with your part-time wages and planned withdrawals. Check ACA or IRMAA thresholds as relevant.
4. Pick the withdrawal mix that fills your current bracket without creating new tax cliffs.
5. Revisit quarterly if your part-time hours or pay change midyear.

Key Takeaways

• You can work part-time and withdraw from retirement accounts; the key is coordinating taxes and benefits.
• Before FRA, the Social Security earnings test can reduce checks; after FRA, there’s no limit.
• RMDs start at 73 for IRAs; a still-working exception may delay current employer 401(k) RMDs if you’re not a 5% owner.
• Roth accounts offer tax-flexible cash flow; follow the two five-year rules.
• Mind ACA subsidies pre-65 and Medicare IRMAA at 65+ to avoid costly surprises.

FAQ

What is the focus keyword for this article?

Focus keyword: part-time work in retirement

Does working part-time ever reduce my Social Security?

Yes—if you’re under FRA and your wages exceed the annual limit, part of your benefit is withheld and later credited at FRA. After FRA, there’s no earnings limit.

Can I contribute to a 401(k) while taking IRA withdrawals?

Yes, if your employer allows part-time participation and you have earned income. Many retirees contribute modestly to capture any match while taking small IRA withdrawals as needed.

Should I prioritize Roth or traditional withdrawals while working?

It depends on your bracket, IRMAA exposure, and goals. Many retirees “fill up” a favorable tax bracket with traditional withdrawals and use Roth for the remainder.

What about healthcare before Medicare?

On ACA coverage, even small increases in MAGI can reduce premium tax credits. Model income before making big withdrawals or conversions.