Retirement jobs? While this sounds awesome, you better be careful because some of them might affect your Social Security
A lot of Americans are looking to get a part-time job after retirement. Why? Some of them want another source of income besides Social Security, and others want to be active or need to do something that keeps them busy during the day. But did you know that working in retirement might come with a lot of unexpected disadvantages?
If the idea of working again (even part-time) for a couple of years after retiring sounds appealing, you may want to think about the consequences of this action. Depending on the state you’re living in, working after you retire can seriously affect your savings and any benefits you’ve already received (Social Security). Here are 7 things you might want to take into consideration before returning to work after retirement.
1. You can still contribute to your retirement funds
Since 2020, the age limit for all IRA contributions has been eliminated. And I still remember that this decision was one of the best things that happened in that year when the pandemic started and everybody was panicking about it. You can still contribute to a current employer’s 401(k) until you quit the job. If you are self-employed, you can contribute to SEP-IRAs or alternative 401(k)s, whichever works best for you.
2. Your employer can cancel your health insurance after you turn 65
Believe it or not, your employer can do that. If you want to have a full-time job or you are part of a small company that has 20 employees, they can cancel your health insurance after you turn 65. However, they might let you keep it, but only half of it, and that means it becomes secondary to Medicare, and in case something happens to you, you will have to pay more than half of the total price.
If the company has more than 20 employees, they have to offer the same health insurance to everybody, no matter their age. If you want to work after retirement, you have to ask the employer how many hours you have to work to have full health insurance because it may vary from one company to another.
Remember that when you return to work for a company that provides it, you are still eligible for Medicare coverage even if you choose to enroll in private health insurance. You can have primary or secondary insurance in addition to Medicare!
3. Social Security might be reduced if you decide to re-enter the workforce
This might be the major reason a lot of seniors change their minds about re-entering the workforce after retirement. For all those who were born in 1960 or after, the Social Security Administration considers age 67 to be the full retirement age. Your potential Social Security payments may be reduced if you retire before this age.
Your monthly Social Security payout will be lowered by 5/9 of 1% if you retire and then return to work before reaching the required age. Regardless of your full retirement age, you are entitled to start receiving benefits as soon as you turn 62 or as late as age 70; however, the longer you wait to start receiving benefits, the more money you will receive from Social Security.
4. Working longer can increase your Social Security benefits
If you are planning to delay receiving Social Security benefits until you are 70, you must know that this will increase your checks by 8% each year. Sounds promising, right? Your Social Security payment is calculated using your 35 years of peak earnings. If your current income is higher than previous ones, your benefit may be slightly increased. The individuals most likely to gain from working longer hours are those who have experienced numerous years of low or no income during those 35 years.
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5. Your Social Security benefits could be taxable
If you’re planning on getting a job after retirement, your Social Security benefits may become taxable if your gross income increases above a certain limit. And what percentage of the total benefits are taxable, you may ask? Around 85%. In case this thing lingers in your head and you want to find out more about this subject, don’t hesitate to ask a tax advisor. They will know exactly how much of the gross income is taxable, depending on the income, and how you can avoid this particular situation.
Tip: Working during your retirement years may have a lot of benefits, but on the other hand, it’s crucial to know what you will be gaining and what you will lose in the process.
6. Possible repayment requirements for any advantages you have received
You have a year from the time your Social Security application was submitted to determine whether to come out of retirement if you are younger than 70 years old. Only if you submit a templated letter to the Social Security Administration are you able to do this. You will be required to repay any benefits you have already received, including any that have been withheld from checks, once they have been approved. You can subsequently reapply if you choose this path.
7. Check your pension
Even though pensions are not a thing anymore, those who still receive them should think about the impact that returning to the workforce might have on them. This may differ from one state to another, but before thinking about returning to work, you should consider a few things. Because every pension is different, financial specialists recommend looking at the plan’s details.
In an ideal world, retirement would be a destination, something to strive for after a long and stressful career. We deserve to relax and enjoy our golden years. But in the past few years, more and more people have realized that their retirement savings may not be enough to live a decent life. According to various statistics, more than 70% of Americans who are 65 years of age or older continue to keep their jobs for at least 5 more years. And a lot of others are planning to return to a 9-to-5 job after retirement. Does this apply to you as well? Tell us in the comments.
Keep in mind that returning to work after retirement should only be voluntary! If this decision belongs to you and you alone, then go for it. Just make sure you make all the necessary plans that include both Social Security and health insurance. You never know when you’ll get sick or need some blood tests your doctor has recommended. If you’re not entirely sure that this decision is the wisest out there, you can always contact a financial advisor to help you with professional advice.
I know that this awful inflation is a pain in the neck for most of us, especially retirees, but make sure that your decisions are the best for you and your life!
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