What happens if you continue to work after you retire? You’re not the only one who feels this way. If you’re losing a feeling of purpose, working after retirement can help. If you decide to return to work, keep in mind that the IRS has several restrictions and limitations that might affect your Social Security income, Medicare coverage, pensions, and other retirement assets.

 

It’s natural to imagine that seniors will happily leave the profession to pursue more leisurely goals when it’s time to retire. Still, a rising number of Americans are choosing to work during their golden years.

Nearly half of all retirees in the United States intend to work part-time or on the side after retiring.

 

Reasons to Keep Working After Retirement

• Benefits to your health:

 Working over the age of 65, according to a study done by Oregon State University, contributes to a longer life. Those who worked for at least one year after turning 65 had an 11 percent lower risk of dying from any cause. According to the study, those who described themselves as unhealthy had a better chance of surviving longer if they stayed in the workforce.

The social connections that come with being in a professional setting are also advantageous in keeping up with tasks and other responsibilities.

• Continue to be covered by your employer’s health insurance:

 In retirement, healthcare can be a significant expense because of coverage. Your employer’s health insurance may be a better option than Medicare if you stay in the workforce.

• Work on your terms:

 One of the most appealing aspects of retirement is its independence to those who have spent their working lives bound by deadlines and duties. Working part-time in retirement doesn’t have to limit your newfound freedom.

 If you don’t want to be overly enslaved by your career, go for a part-time position. That way, if you wish to travel, attend all of your grandkids’ extracurricular activities, or pursue any other pastime, you may still achieve your retirement goals.

 

Financial Benefits of Working in Retirement

• Increasing the value of your savings:

 If your workplace has a 401(k) plan and you’re eligible, you can contribute up to $20,500 for 2022, plus an extra $6,500 in catch-up contributions (for those 50 and over). If you have a delayed annuity, you can continue to save even if your 401(k) or IRA contribution maximum has been reached.

• Allowing you to choose the amount of savings you use each year:

Market volatility, interest rates, inflation, health care costs, and risk tolerance all influence the amount of money you may spend in retirement (i.e., your withdrawal rate). Earning money can help you save longer by offsetting these factors.

• Maximizing your Social Security benefits:

Although you can begin collecting benefits at the age of 62, waiting may be beneficial. Your overall reward grows with each year you wait until you reach the maximum age of 70. Benefits from Social Security are calculated using your top 35 years of earnings. Working longer could improve your Social Security payout because non-work years aren’t considered. 

 

Social Security rules for retirement and benefits

Depending on the year you were born, your Social Security payments could be reduced by up to 30% if you retire and begin receiving benefits before reaching your full retirement age as defined by the Social Security Administration.

You can postpone the start of Social Security benefits by working full or part-time. The longer you wait until you reach the age of 70, the larger your monthly Social Security benefit will be.

 If you are already receiving Social Security benefits and decide to work, be advised that if you earn more than $18,240 before reaching full retirement age in 2020, your Social Security income will be reduced by $1 for every $2 earned. Social Security will deduct $1 for every $3 you make after $48,600 in the year of your full retirement age; they only count your earnings up to the month before your full retirement age, not later.

 You can work as much as you like once you reach full retirement age without affecting your Social Security payments. However, it would help if you spoke with a tax professional about the impact of such work arrangements on your Social Security benefits.

 

Medicare Coverage for High-Income Earners

Let’s imagine you want to keep your Medicare coverage and go back to work after you’ve turned 65.

If you obtain a profitable second career or consulting post, you may enter a higher income category and face Medicare surcharges. High-income people must pay extra for Medicare Part B and Part D.

 

How Returning to Work Can Impact Pensions

Returning to work after retirement could have an impact on your pension. Because each pension is unique, it’s critical to review the specifics of your plan.

If you want to work for your old employer while still receiving pension benefits, you may need to be rehired as a part-time or contract worker.

Returning to work for a former employer may cause your pension payments to be suspended in some cases.

 If you work full-time for a different employer, you can still earn a pension. To learn more about any potential fines, contact us, so we can help you discover if your retirement plan syncs up with your assets.

 The most common concerned that our clients have is if their money will run out during retirement. Feel free to reach out if you have been wondering the same thing.