Working After Retirement

Retirement was once a destination — a goal post to mark the end of a long, productive career.

But research indicates that retirement is becoming much more fluid in America.

A 2017 survey from RAND Corporation, a nonprofit research firm, found that almost 40% of workers over age 65 had previously retired — only to rejoin the workforce.

And for those still in retirement, roughly half said they would return to paid work if the right opportunity presented itself.

According to researchers: “The fact that these individuals have access to Social Security benefits and possibly other retirement income suggests they can afford to demand working conditions that more closely match their preferences in order to participate in employment.”

So, what motivates people to “unretire” or start an encore career?

“If you’re thinking about returning to work, one of two things has happened,” Accredited Financial Counselor Susan Greenhalgh told RetireGuide. “You’ve either been struck with a severe case of boredom and miss the sense of purpose working gives you — or you’re feeling a financial pressure to go back, maybe due to an emergency.”

In late 2021, during the COVID-19 pandemic, more than half of American adults 55 and older had left the workforce, according to an analysis by the Pew Research Center. But many people who retired early may be having second thoughts.

More than 10 million Americans ages 65 and older remain in the labor force, according to the Bureau of Labor Statistics. Another nearly 26 million ages 55 to 65 are also working. And the Census Bureau reports a trend of older Americans remaining in or returning to the workforce.

There are pros and cons to back out of retirement and return to work. You may want to compare them and consider your personal desire to return to work to determine your best options.

What Are the Benefits of Returning to the Workforce?

Returning to work offers benefits ranging from extra income to returning to a career that gave you enjoyment or a sense of purpose.

Some of the benefits may depend on whether you enrolled in Social Security at your full retirement age and whether you are enrolled in Medicare.

Risks of Returning to the Workforce

You should also consider the downsides of returning to the workforce. While some downsides may be the obstacles that come with rejoining the workforce, others may be financial losses you could suffer.

Returning to work is a unique, personal decision.

But before you head back, experts like Greenhalgh say it’s essential to get a firm grasp on your current cash flow and budget.

“You need your eyes wide open to your own financial situation,” said Greenhalgh, who started her business, Mind Your Money LLC, in 2018 at the age of 62. “You need to be honest with yourself about your needs and your capabilities.”

Working in retirement can supplement your income but it’s important to understand what you’ll be gaining — and potentially losing — in the process.

“It’s important to do a deep dive into these things first,” Greenhalgh said. “Otherwise, you’re going to be surprised at how your benefits may be impacted.”

If money is your primary motivator, look for jobs with wages and benefits that fill your income gaps without jeopardizing your benefits or negatively affecting your bottom line.

You can return to work and still collect Social Security retirement benefits.

But certain limits and rules must be followed.

Adrienne Ross is a financial planner in Spokane, Washington. She told RetireGuide that many people take Social Security benefits at age 62 — even if they have money saved in a retirement account.

“It often seems like a safe, secure idea to take those benefits as soon as possible,” said Ross, founder of Clear Insight Financial Planning.

But starting Social Security when you’re first eligible reduces your benefits by as much as 25% to 30%.

“People may claim Social Security at 62 only to go back to work a few years later because they’re not getting as much money in benefits as they anticipated,” Ross explained.

Your age determines how much you can earn.

In 2022, you can earn up to $19,560 without impacting your benefits before full retirement age.

However, once you hit that threshold, your Social Security check goes down $1 for every $2 earned.

For example, you start collecting Social Security benefits at age 62. At age 64, you get a part-time job and earn $25,000 in a year.

This is $5,440 over the limit. Your Social Security check will be reduced by $2,720 that year — or $1 for every $2 earned.

In the year you reach your full retirement age, you can earn up to $51,960 in 2022 before your benefits are docked. After the $51,960 threshold, your benefits are reduced by $1 for every $3 earned.

Finally, once you hit your full retirement age, there is no cap to your income and you can even increase your Social Security benefits if you choose to continue working. Should your benefits increase, the Social Security Administration will send you a letter informing you of your new benefit amount.

You will still continue to pay Social Security taxes on your earnings for each additional year you work.

If Social Security is your only source of income, you don’t need to worry about paying taxes on your benefits.

But things get more complicated if you return to work and start making money.

The Social Security Administration uses a term called “combined income” to determine how much of your check can be taxed.

If that combined income number is less than $25,000 for an individual, then your Social Security benefits aren’t taxable.

If your combined income is between $25,000 and $34,000 for a single filer, you may owe income tax on up to 50% of your benefits.

If your combined income is more than $34,000, up to 85% of your benefits can be taxed.

Each January, you’ll receive a Social Security Benefit Statement, Form SSA-1099. Use this when you complete your federal return to see if you owe taxes on your benefits.

Social Security benefit taxation is complicated. Reach out to a tax professional or financial planner if you need help.

It’s smarter financially to delay Social Security benefits until your full retirement age, Ross said.

Still, there’s a couple ways to recoup at least some of those losses.

First, if your benefits were reduced because you made more than the income limits mentioned earlier, you actually get that money back — eventually. It isn’t gone forever.

Here’s how it works.

Let’s assume you take Social Security at age 62 and receive a monthly benefit of $1,000. At age 63, you decide to go back to work.

You work for 12 months and earn more than the $19,560 income limit. Your Social Security benefits are reduced to $500 for 12 months as a result.

Once you hit full retirement age, those 12 months of reduced benefits are paid back to you.

In this case, you’d receive your normal $1,000 monthly benefit plus $500 for 12 months.

After that, your benefit goes back to your standard $1,000 a month.

Here’s something else to keep in mind: Your Social Security check is based on your top 35 years of earnings.

If your latest year of work turns out to be one of your highest, Social Security will refigure your monthly benefit and you may see a boost in your check once you hit your full retirement age.

This is different than recouping your reduced benefits, and it likely won’t affect you if you returned to work for a low-paying or part-time job.

For more information about working and Social Security benefits, check out the SSA’s How Work Affects Your Benefits booklet.

If you’re 65 or older, you likely get health insurance from Medicare or a Medicare Advantage plan.

Original Medicare is made up of two parts — Part A hospital insurance and Part B medical coverage. You may also choose to purchase a standalone Medicare Part D prescription drug plan or a Medigap supplement insurance policy.

Most people don’t pay a monthly premium for Medicare Part A. But nearly everyone pays a monthly premium for Medicare Part B. In 2024, the Part B premium is $174.70.

If you return to work for an employer who offers private health insurance, you can take it and still keep your Medicare coverage. You’re allowed to have both.

Medicare may act as your primary coverage or your secondary coverage.

You may consider dropping Medicare Part B if you return to work. Some people do this to avoid paying the $174.70 monthly premium in addition to any employer health care costs.

However, this can be tricky. If you’re not careful, you may owe penalties and face other issues down the road.

First, your employer must have more than 20 employees. If that’s not the case, you may be penalized for dropping Medicare Part B.

If you have active employer coverage, you can choose to disenroll from Medicare Part B.

Once you lose your employer health insurance or return to retirement, you must sign up for Part B again within eight months.

Otherwise, you may face a lifetime late enrollment penalty.

Meanwhile, you only get two months to sign up for a standalone Part D plan once your workplace coverage ends. You can face a late-enrollment penalty for this, too.

To disenroll from Medicare, you’ll need to submit a form, CMS-1763, and it must be completed during an interview with a Social Security representative.

Let’s say you return to work after age 65 and keep your Medicare coverage.

If you land a lucrative second career or consulting position, you may enter a higher income bracket and face Medicare surcharges.

That’s because, by law, high-income earners pay more for Medicare Part B and Part D.

If you’re single and earn more than $103,000 but less than or equal to $129,000 a year, you must pay an additional $69.90 a month for your Part B premium in 2024.

For a married couple filing jointly, extra charges start at incomes above $206,000.

A similar, smaller surcharge applies to Part D premiums.

In 2024, an individual who makes between $97,000 and $129,000 a year will owe a $12.90 income-related monthly adjustment amount in addition to their standard Part D premium.

Pensions and retirement accounts are two additional ways people supplement income in later life.

But certain tax rules and conditions need to be considered if you’re rejoining the workforce.

Returning to work after retiring may affect your pension.

Each pension is different, so it’s important to look at your plan’s details.

Sometimes, you must be rehired as a part-time or contract worker if you want to work for your former employer and still receive pension benefits.

Other times, returning to work for a former employer will suspend your pension benefits.

You can usually still collect a pension and work full-time so long as it’s with a different company.

Check with your human resources department and your pension plan provider first to understand any potential penalties.

Certain retirement accounts, including 401(k)s and IRAs, follow a tax rule called required minimum distribution, or RMD.

This requires retirement plan account owners to withdraw money starting at age 72, or 73 if you turn 72 after Dec. 31, 2022.

Even if you continue working past 72, you must take a RMD from your IRA.

If you don’t, you’ll face a potential 25% tax penalty.

You might be able to delay taking RMDs from your current employer-sponsored retirement account, such as a 401(k), 457(b), or 403(b).

If you go back to work, consider adding money to your retirement accounts.

A law known as the SECURE Act of 2019 makes this possible. It allows all retirees to contribute to traditional IRAs and 401(k)s if they earn wages.

People over age 50 can contribute up to $7,500 a year to an IRA in 2023. And if your company offers a 401(k) match, take it. It’s essentially free money.

“This can help increase your savings if you maybe didn’t have much money in savings before returning to work,” Ross told RetireGuide.

Contributing to a retirement account can also help offset taxes owed on your Social Security benefits because adding money to an IRA or 401(k) plan shrinks your adjusted gross income, Ross added.

Understand that it becomes more difficult to find a job after you turn 50 — whether you retired from your last gig or not.

Returning to the workforce after retirement can bring an extra set of difficulties. Be prepared to face bias but keep an optimistic attitude. All job seekers must deal with rejection before landing the job they want. That may be even more so if you’re returning from retirement.

You’ll also need to identify the type of job you want and why you want it — part time, full time, a return to your old career or starting something entirely new to you.

Steps to Launch Your Job Search After Retirement

Network online
Create a professional online presence. Update or launch work-specific accounts on LinkedIn, Facebook, Instagram and Twitter. Post and comment on elements of your profession or career. These can help showcase your career expertise. Use your social media connections to connect with potential employers and find job opportunities.

Create an age-proof resume
Highlight your experience without referencing your age. Keep your resume short, including only relevant or recent jobs — but highlighting your accomplishments under a “Career Highlights” section at the top. Get rid of graduation dates or any other references that may give away your age. Make sure your email address is updated and timely and list your cell phone number — never your landline. Don’t include a fax number. Include social media info — particularly related to the professional profile you’ve created with career-related social media accounts.

Online job search focused on older workers
There are online job search sites that specialize in connecting retirees and older workers with companies looking to hire, as well as sites that provide resources for older workers looking to get back into the workforce.

Job Fairs
Traditional job search avenues may still be helpful. A job fair can force you to network and do other aspects of your job search that are vital — but that most people tend to dislike. It also gives you a chance to meet company representatives face-to-face, making you more than just another resume or application. Plus, it gives you immediate feedback on your resume and experience and how an employer reacts to them.

Self-Employment
Retirement is an ideal time to try your hand at self-employment — especially if you have retirement savings to support yourself. If there’s a hobby you want to turn into a business or a line of work you always wanted to try, this may be a route back to the workforce.

You should carefully consider the type of work environment you want to be a part of before starting your workforce job hunt. The COVID-19 pandemic and subsequent “Great Resignation” has significantly changed where, when and how Americans work.

There are different advantages and disadvantages that make different work environments ideal for different people.

Remote working has also created new job opportunities for people with limited mobility or other conditions that may make a traditional workplace less appealing.