Working After Retirement: Pros, Cons, and Financial Considerations
More and more people are choosing to either remain in the workforce longer, or return to work after retiring. In 2016, 18.8 percent of Americans ages 65 and older reported they were still working either full or part-time jobs. That marked a six percent increase in just 16 years since the year 2000.
After the recession, many Americans witnessed their retirements saving dwindle away, and felt the need to continue working longer than the generations before them had ever done. Others choose to continue working for the sense of purpose and social inclusion.
Whether you’re looking to supplement your income, or just want to get out of the house a few days a week, working after retirement has many pros and cons to consider. In this article, we’ll explore how working in retirement can affect your taxes, social security income, and medicare. We’ll help you weigh your options and anticipate challenges before jumping back into the field.
Table of Contents
Can You Work and Collect Social Security?
Yes, you can work and collect social security benefits at the same time. However, the amount of supplemental security income (SSI) you receive depends on whether or not you have reached your full retirement age (FRA), and what your modified adjusted gross income (MAGI) is. We’ll provide more detail in the sections below.
How Much Can You Earn While on Social Security?
You can earn as much as you want while collecting your social security benefits. However,
if you retire early and haven’t reached your FRA (66 or 67 for those born in 1943 or later), then your benefits could be reduced, depending on the amount you earn above the annual limit. Currently, the government considers the annual limit to be $17,040. Here are a few example scenarios to consider:
- If you haven’t yet reached your FRA, you will lose $1 of benefits for every $2 earned above the annual limit ($17,040).
- If you will reach your FRA in the current year, your annual limit raises to $45,360, and you will lose $1 of benefits for every $3 earned above that limit.
- If you have already reached your FRA, you will not lose any SSI benefits, no matter how much you earn.
Keep in mind the annual limits in this information are current for 2018 legislation, which is subject to change. And, working in retirement could move you into a higher tax bracket, meaning you could pay higher taxes on your SSI benefits.
Note that if you choose to delay collecting your SSI benefits after you’ve reached your FRA, you could be eligible for delayed retirement credits. So if you plan to work in retirement, consider the potential benefit of delaying your SSI, instead of collecting it along with your salary.
How Many Hours Can You Work on SSI?
The number of hours you work in retirement does not affect your SSI benefit. It will be up to you to calculate your pay and your hours worked to determine if your income will exceed the annual limit detailed above. Your age also determines if your benefits will be reduced so be sure to know your FRA.
Can You Take Medicare While Working?
Medicare is age-based, so your healthcare won’t be affected by your employment status. The social security administration (SSA) recommends signing up for Medicare as soon as you turn 65, even if you plan to delay retirement.
If your employer, or your spouse’s employer, provides coverage, Medicare could provide supplemental coverage after your group insurance plan pays first. This depends on the group plan you get and should be discussed with the human resources department at your place of work.
Benefits of Working in Retirement
Now that you know how working after retirement could affect your SSI benefits and healthcare, let’s explore some benefits of working in retirement you might not have considered:
- Added financial security
- Better (supplemental) health coverage
- Continue paying into your pension
- Delay your SSI and increase your benefits later in life
- Growth in your chosen field
- Having a sense of purpose
- Improved mental and emotional health
- Learning a new skill
- Maintaining physical health
- Opportunity to travel
- Social inclusion
- Starting the business you’ve always wanted
- Supplemental income
- Trying out a job you’ve always wanted
If you want to reenter the workforce but aren’t sure where to start, take a look at some of our resources on best jobs for seniors or find volunteer resources for retirees.
Disadvantages of Working in Retirement
While continuing work in retirement can be financially, physically, and emotionally beneficial — it still has its disadvantages. If you’re struggling to make up your mind, take these factors into consideration.
- Less time doing what you’d planned in retirement
- Increased daily expenses: work attire, travel, food and drinks
- Supplemental retirement income could increase your tax rate
- Working in retirement could decrease your SSI benefits
- The workplace could be different from what you’re used to
- You could experience ageism
- Learning the necessary skills could be a challenge
Choosing whether or not to work in retirement is a personal choice and will depend largely on your financial situation and your goals for the future. Take time to consider the pros and cons before making your decision and consult a financial advisor if at all possible.
Tylene is a freelancer in Boise, Idaho. She's a self-taught personal finance hacker with zero debt. She eats avocado toast for breakfast.
This post was updated February 28, 2019. It was originally published May 25, 2018.