Retirement Side Income Tracker

Consulting, advisory and board fees are self-employment income, so they carry self-employment tax on top of income tax, at any age. Self-employment tax is 15.3% of 92.35% of net profit: 12.4% for Social Security, on earnings up to $184,500 in 2026, and 2.9% for Medicare on all of it. You deduct half of it in working out your income tax. The IRS treats corporate director fees the same way, as self-employment income reported on Schedule C (IRS Publication 525).

The income tax is where retirement differs from a career. Consulting fees sit on top of a pension, dividends, IRA withdrawals and eventually Social Security, so they are taxed at your marginal rate, often 22% or 24% federally. With a 5% state tax, a retiree in the 24% bracket keeps roughly 58 cents of each dollar of net profit. The calculator applies your bracket and state rate to the whole profit, so enter the rate your other income already puts you in.

Self-employment has one advantage an employee does not: you can deduct the costs of doing the work and, more valuably, open your own retirement plan. Both are covered below.

If you claim before full retirement age and earn more than $24,480 in 2026, Social Security withholds $1 of benefits for every $2 above that limit. In the year you reach full retirement age, the limit rises to $65,160 and the withholding falls to $1 for every $3, counting only earnings in the months before your birthday month. From the month you reach full retirement age, which is 67 for anyone born in 1960 or later, there is no limit at all (SSA, 2026).

Only earned income counts: wages from a job, and net earnings from self-employment. Pensions, annuities, investment income and capital gains do not. For the self-employed, Social Security counts income when you receive it, not when you did the work, so a large fee paid in January of the year you reach full retirement age is treated differently from one paid the December before.

In your first year of retirement a special monthly rule can help. If you will be under full retirement age all of 2026, you are treated as retired in any month your earnings are $2,040 or less and you did not perform substantial services in self-employment, and you receive a full check for that month whatever your annual total. Substantial services generally means more than 45 hours a month in the business, or between 15 and 45 hours in a highly skilled occupation (SSA). A consultant who works a few intense months and then stops can often collect for the quiet months.

Withheld benefits are not forfeited. At full retirement age Social Security recalculates your benefit to credit the months it withheld, so the monthly amount rises from then on. The practical cost is timing: money you expected in your early sixties arrives later, spread over the rest of your life.

If your side income is well above the limit and you are under full retirement age, claiming now usually makes little sense. Net profit of about $78,500, for example, would withhold a $24,000 benefit entirely in 2026. You would have claimed early, accepted the permanent reduction for claiming before full retirement age, and received little or nothing for it until the recalculation.

Waiting keeps the option open. Each year you delay, up to 70, raises the benefit, and for a married couple the higher earner's benefit becomes the survivor's. If your consulting is winding down within a year or two, the special monthly rule may let you claim for the months after it ends. Our guide on when to claim Social Security sets out the trade-offs in full, and the Social Security Estimator compares claiming ages.

At the same net profit, a Solo 401(k) often takes several times what a SEP does, because it adds an employee deferral and catch-up to the same employer contribution. For a sole proprietor, the employer contribution is effectively 20% of net profit less half the self-employment tax (IRS). A Solo 401(k) adds the employee deferral of $24,500 in 2026, plus $8,000 at 50 or older or $11,250 at 60 to 63 (IRS). The deferral limit is per person, not per plan, so if you still deferred into an employer 401(k) earlier in the year, only the rest is available.

Traditional contributions lower income tax in the year you make them but not self-employment tax. Most Solo 401(k) plans also allow Roth deferrals, which can suit a retiree who expects RMDs, which start at 73 or 75 if you were born in 1960 or later, to keep their bracket high later on. If your consulting income is modest, even an IRA contribution becomes possible again, because net self-employment income counts as earned income; the Roth IRA Calculator checks eligibility.

It can raise Medicare premiums, shrink the room for Roth conversions, and change how much of your Social Security is taxed.

• Medicare premiums. Part B and Part D premiums rise with income through IRMAA, based on your return from two years earlier. Consulting at 63 can raise premiums at 65. See the Medicare and IRMAA guide.
• Roth conversions. Side income fills the same low brackets you might otherwise use to convert. A Solo 401(k) deduction can win some of that room back. See Roth conversions before RMDs.
• Withdrawal order. A year of consulting income is often a year to leave the IRA alone and spend from taxable accounts; see the withdrawal order guide.
• Estimated taxes. Raising the withholding on a pension or IRA distribution is often easier than quarterly vouchers, because withholding counts as paid evenly through the year.