As a retiree, you have years of work experience behind you and now plenty of time on your hands. If you are looking for a productive (and lucrative) way to fill the hours, you may be considering going back to work or putting off retirement for a while. Although you have officially stopped punching the clock, or are eligible to do so, should you continue working?
Working positives
If you continue to work during retirement, you will reap a variety a benefits. If you already love what you do, there is no reason to leave your field or if possible, your current position. If your coworkers are more like family, and saying goodbye would be too much to bear, then don’t. Even if full-time is no longer appealing, perhaps you could have the best of both worlds with a part-time working schedule. On the other hand, if you are ready for something new or to expand your social circle, retirement provides the perfect time to shift gears while still providing a workplace setting that challenges your mind and connects you with people.
Another reason for working during retirement is more black and white (well, actually, green). “A retirement job can provide extra funds for traveling, gifts for grandchildren or social activities,” explains U.S. News & World Report contributor Tom Sightings. If you aren’t as financially stable as you need to be by retirement age, you can bolster your funds or keep your employer-paid insurance benefits by working, too, he adds.
Working longer can also increase what you eventually get back from the government. “Delaying the start of Social Security will increase your checks by roughly 5 percent to 8 percent each year you put off your application (until age 70). Delaying could help in another way, as well. Social Security bases your benefit on your 35 highest-earning years. If the amount you earn exceeds an amount you made previously, that could boost your benefit somewhat,” writes NerdWallet writer Liz Weston.
Working negatives
The one thing that may cause you to push the pause button on working during retirement involves your finances; specifically, the benefits you receive from Social Security. If you are working during retirement and receiving a paycheck, your Social Security benefits and your taxes can be significantly altered.
“If you’ve started Social Security benefits your earnings may push up your income to a level where your Social Security benefits become taxable. If you’re younger than full retirement age, working may even temporarily lower your Social Security benefit,” warns Sightings. If you are exercising your entrepreneurial spirit as opposed to reporting to a boss, you might have to contend with a payroll tax of approximately 15 percent. “And after age 70, your tax bill may go up again when you’re faced to take distributions from an IRA or 401(k) plan,” he adds.
Working during retirement can provide extra cash, protect your health insurance, offer exciting challenges, and keep you connected to the workforce. It can also affect your Social Security benefits and taxes, and limit your free time to pursue new or favorite hobbies or gather with loved ones. Deciding what to do can be complicated; before you make any decisions, consult with a financial advisor.