The Pros and Cons of Working While Retired

You would not be alone in entertaining the thought of continuing to work after retirement. The Bureau of Labor Statistics estimates that by the time we reach 2030, the percentage of adults aged 75 and more who are employed will have increased by 96.5 percent.

Finding some kind of work to do in retirement, even if only part-time, might make you feel more secure financially and keep you from being bored. However, this retirement lifestyle may not be what you expected. If you’re attempting to decide whether or not working after retirement is a good idea, think about the benefits and drawbacks listed here.

Being employed after retirement can be a great way to meet new people and break up the monotony of life, but let’s be honest: money is the real motivation. Working after retirement can help you financially in the ways listed below.

Reduce your reliance on financial assets.

Retirees and those on the brink of retirement can take a significant hit in the event of a bear market. Consider getting a part-time job if a lengthy recession could ruin your retirement savings. Your reliance on retirement savings and Social Security will decrease as you diversify your income. With fewer withdrawals from your retirement account during a market downturn, your portfolio will have more time to recover.

And if you’re above 70 and still employed, you won’t have to take any money out of your workplace retirement account until you retire. Traditional Individual Retirement Accounts are excluded from this.

Keep putting money away for retirement.

Getting a job or starting your own business as a retiree is a great way to supplement your savings without working after retirement. Earned income, or money you bring in from working is required to fund an individual retirement account (IRA). You’ll also need a company that provides retirement plans to put money away in a 401(k) or 403(b).

You’ll keep making those contributions to Social Security as well. You can swap out low-earning years for higher-earning ones to increase your benefits, as payments are based on your 35 highest-income years.

Prices for medical insurance may go down.

Retirement before age 65 makes you eligible for Medicare, so you may want to keep working until then to keep your employer-provided health insurance. Companies are obligated to provide health insurance to employees who work more than 30 hours per week by the Patient Protection and Affordable Care Act. However, some companies offer coverage to people who work fewer hours than that.

It may make financial sense to keep working after Medicare eligibility to take advantage of employer-provided health insurance. Employer-provided health insurance may allow you to put off enrolling in Medicare Parts B and D. Due to the complexity of the regulations, it is recommended that you speak with your company’s benefits office.

While there are benefits to working after retirement, there are also many negatives.

Reduced payments from Social Security are possible.

You should rethink taking early Social Security benefits if you intend to continue working. When a person’s income rises above a specific limit, the government temporarily cuts their use.

If a Social Security recipient’s annual income is more than $21,240 in 2024, their payment will be reduced by $1 for every $2 beyond that amount, up to a maximum reduction of 25%. Those who reach full retirement age in 2024 will have $1 of their income withheld for every $3 they make over $56,520; however, those who reach full retirement age at age 67 will keep their full benefit. However, after you reach full retirement age, you will begin to receive the money-back in the form of larger payments.

There’s also the possibility that taxes will reduce your Social Security benefit. If your annual income is between $25,000 and $34,000, or between $32,000 and $44,000 as a married couple, up to half of your benefit may be subject to taxation. When your income is above certain thresholds, the IRS will tax up to 85% of your Social Security benefits.

Sometimes, a person’s work obligations can compromise their happiness.

Working and saving for many years might prepare you to retire finally. You can’t go on vacation, spend time with your loved ones, or relax on the golf course if you’re tied to your job. Or, if you’re dealing with health issues, you might discover that working is quite challenging.

During retirement, most persons should work toward replacing between 70% and 80% of their pre-retirement income. It’s possible to get that via savings, Social Security, and even a job. Delaying retirement by a few years may be the best option if you simply cannot stand the thought of doing any kind of work throughout your golden years.

Putting off retirement can provide your investments more time to grow, allow you to delay receiving your Social Security benefit in the hopes of receiving a larger payout, and reduce the amount of time you’ll need to make your nest egg last. That way, you’ll be better positioned to enjoy the carefree retirement you’ve always wanted.