Your Guide to Working After Retirement

Working after retirement used to seem like a contradiction. Isn’t retirement for leisure and rest?  

But today’s retirees are often interested in working, rather than dropping out of the workforce altogether. Perhaps they find themselves at loose ends, wondering how to fill the hours. Or maybe finances are tight and a return to the workforce looks appealing. These decisions are becoming more common: in fact, the number of retirees who choose to work has been steadily increasing over time. 

As with every decision, there are advantages and disadvantages to working after retirement. For example, while you may be able to delay tapping into your retirement savings, your income could affect your Social Security and tax rate. It is not a decision to be made lightly. 

Can I Work After Retirement — and Should I?

Going back to work after retirement is a big decision. Here are five things to consider when deciding whether working part time after retirement is for you.

Is Part-Time Work For You?

You’ve spent years planning for retirement, but maybe you find that hobbies or volunteer work aren’t enough to fill your days. 

If you want to continue working and aren’t interested in a 40-hour work week, consider working part time. By working part time, you can achieve a good balance with a steady stream of income and a manageable schedule while still having time to enjoy yourself in retirement.

How Will It Impact Your Social Security?

One disadvantage of working after retirement has to do with your age. Yes, you can work and collect your Social Security benefits at the same time. But if you claim Social Security benefits early — that is, before the retirement age of 67 — and continue working, you’ll be subject to an annual earnings test and may not be maximizing your retirement benefits.

According to the Social Security Administration, if you were younger than retirement age throughout all of 2023, but filed for benefits early, then you lost $1 in benefits for every $2 in earnings above the $21, 240 limit. If you reached full retirement age in 2023, but received benefits before then, you lost $1 for every $3 you earned above $56,520 until the month you turned 67. These benefits aren’t lost forever; once you reach 67, your monthly benefit will be increased to account for the months that benefits were withheld. 

However, if you delay the start of your benefits, they will increase 8% each year after your full retirement age, up to age 70. For example, if your benefit at age 62 is $1,275 per month and your expected full retirement benefit at 66 is $1,700 per month, it would increase to $2,244 per month by age 70. That’s 76% higher than if benefits would have started at age 62. That means you don’t want to start taking benefits earlier than you need to.

Once you reach full retirement age, there’s no penalty for working while receiving Social Security payments. However, both your wages from your job and your Social Security benefits are taken into account when calculating your tax bracket; working while collecting Social Security could push you into a higher tax bracket. 

Will You Be Able to Save More?

According to the Employee Benefit Research Institute’s 2023 Retirement Confidence Survey, a quarter of retirees report having little to no savings, and 67% of retirees report feeling concerned that the increased cost of living will make it harder to save money. Perhaps you find yourself in the same position, having retired without enough money in the bank or with debt. 

Working longer may be a solution, allowing you to put more money away. Going back to work for a year or two, thus avoiding pulling from your savings, can make a big difference. You can also continue to contribute to your retirement plan. If you’re 50 or older, you may be able to make annual catch-up contributions. In 2024, you can make catch-up contributions of $7,500 into 401(k), 403(b), SARSEP and governmental 457(b) plans. You can also contribute an extra $1,000 to an IRA. 

How Will You Meet Your Healthcare Needs?

Perhaps you’re thinking about medical coverage as you make your decision about working after retirement. Access to employer benefits can be a big reason for working past retirement age or returning to the workforce. The employer-sponsored health insurance coverage you’ve held through your employer may be hard to match once you’ve retired. 

However, keep in mind that Medicare eligibility begins at 65, regardless of your employment status. That means if you want to retire before 65 and your employer doesn’t have a retiree plan, you’ll have to find coverage on the market. If you’re 65 and still have access to a group health plan through your employer, you can delay enrollment, but once you stop working you must enroll in Medicare.  

Is it Time to Try Something New? 

Retirement is often seen as a chance to try something new and even pursue career dreams you weren’t able to explore before. Now you may be able to work on your own terms, pursuing work that you find fulfilling and make a difference in the world. Plus, with decades of experience and wisdom to draw on, plus connections and financial stability, retired entrepreneurs have many advantages in starting a successful new business.

Start Planning Now

Maybe you’re already enjoying retirement, or maybe it’s still 20 years off. No matter where you are in your career, it’s never too late to learn more about how you can maximize your retirement. Connect with your local Farm Bureau agent or advisor to learn how you can take charge of your retirement strategy.