What to Know Before Taking a Job When You're Retired
Look before you leap back into the job market
You’re retired but you’re not quite making ends meet, or maybe you’re just bored. So working part-time (or even full time) becomes tempting. Before you take the plunge and start earning money again, find out how that extra income could affect your retirement benefits, including your Social Security check, and even your health.
Not your father’s retirement
If you’re planning to keep those paychecks coming in after you reach retirement age, you're not alone. The US Census Bureau reports that in 2010, more than 16 percent of people 65 or older were working or looking for work, a 33 percent increase over 1990.
Moreover, more than 70 percent of people over age 50 who haven't yet retired want to continue working during retirement, according to a study published by the investment firm Merrill Lynch.
“Not working, that was for my parents’ generation,” said one of the study's focus group participants. “I can’t imagine not doing anything for 30 years. Nor could I afford to.”
Many new retirees temporarily leave the work force to relax and recharge before jumping back into the action. “It took just three years of retirement before the bucket list started getting empty,” said another focus group participant.
What to expect
There are plenty of good reasons to work after you’ve hit retirement age. But whether you pick up a full-time job, a part-time job or freelance work, it pays to understand the implications.
If you earn money during retirement:
Your Social Security check may shrink. If you start collecting your Social Security benefits early (the law allows you to collect benefits starting at age 62), before your designated full retirement age (currently 66 or 67), you can earn only so much money elsewhere before the government starts to withhold a portion of your Social Security benefit check. Currently, if you earn more than $15,720 per year, Social Security will start cutting your benefits.
The good news is that the government withholds the money only temporarily. Once you reach full retirement age, it starts paying the full amount of your benefit plus some extra cash to make up for the money it withheld earlier.
You’ll probably earn less than you did. While most non-retired workers say they aren't willing to take a pay cut when working during their retirement years, 72 percent of retired workers who take on paying jobs end up earning at least a little less money per hour, according to the Bankers Life Center for a Secure Retirement. (Even if the paychecks are smaller, six out of ten employed retirees aren't primarily in it for the money, according to a Bankers Life study. Instead, they're motivated by a need to find a purpose in life, a desire to stay physically or mentally active, or some other reason.)
On the other hand, if you manage to pick up some big paychecks, Social Security might increase the size of your benefit, which is based on your earnings history. According to the Social Security Administration, “Each year we review the records for all Social Security recipients who work. If your latest year of earnings turns out to be one of your highest years, we refigure your benefit and pay you any increase due.”
It may change your Medicare enrollment decisions. For instance, according to AARP, if your employer offers insurance, you probably wouldn't want to sign up for Medicare Part B, which has a monthly premium. But if the company has fewer than 20 employees, it can require you to sign up for Part B as your primary insurer.
Your best bet is to call the Social Security Administration, which manages Medicare enrollment, at 1-800-772-1213 (TTY 1-800-325-0778). Discuss your employment situation with them and see what options are available.
Your health may benefit. If you keep working on some level, you may actually need less healthcare.One interesting study published in the Journal of Occupational Health Psychology suggests that older workers who transition gradually into retirement, working part-time or doing temp work before eventually leaving the work force permanently, tend to be healthier both mentally and physically than those who transition from full-time work into complete retirement right away.
You may have to look past your current employer. Most workers in their sixties expect to transition into retirement via their current employer, according to the Transamerica Center for Retirement Studies. Before you retire, discuss your plans with you employer and ask about the availability of part-time, flex-time, seasonal or phase-retirement options.
But be prepared for rejection and, if necessary, look elsewhere for opportunities. “While most expect that their transition to retirement will happen at their current employer, few say that their employers have formal business practices in place that could accommodate them,” said Center president Catherine Collinson in a public statement.”
“By extending our working lives and fully retiring at an older age, we can earn income, bridge savings shortfalls and stay active and involved,” she continued.