Many people that reach typical retirement age have good reasons to keep working. For some it’s because they still enjoy their career and don’t want to quit. For others, it’s out of necessity. They need the added income.
There are even those retirees who find out that “living like every day is the weekend” isn’t all it’s cracked up to be and decide to go back to some type of work.
Whatever the reason, if you are employed after retirement age, you will need to make a number of decisions that can have a significant impact on your finances. Perhaps the most important decisions will likely revolve around Social Security and your retirement accounts.
Financial planner Liz Weston says that working in retirement can come with some unexpected costs and hazards. Writing for Nerdwallet, she answers some of the questions employed retirees often ask.1
Can I collect Social Security at 62 and still work?
Yes, but it’s not your best option if you earn very much. When you start Social Security before your full retirement age (67 for those born in 1960 or later), for every $2 you earn over a certain amount ($17,640 in 2019), you lose $1 in benefits.
Will working longer increase my Social Security benefit?
Delaying the start of Social Security will increase your benefit up to 8% for each year you delay application (until age 70). Additionally, because the amount you receive is based on your 35 highest-earning years, you may be able to offset some low earning years by continuing to work.
Can I suspend my Social Security benefit if I go back to work?
Yes. And you can earn the 7-8% “delayed retirement credit” that will boost your benefit when you do start receiving it. (Weston notes that in her experience some Social Security employees may not be aware of this option, even though it’s listed on their website.)2
Can I keep contributing to my retirement funds if I’m still working after 70 1/2?
It depends on the type of account. You can’t contribute to a traditional IRA. But you can contribute to a Roth IRA and your current employer’s 401(k). If you’re self-employed, you can contribute to SEP-IRAs or solo 401(k)s, but there are IRS rules about required minimum distributions.
When you decide to work after retirement age, there are several other factors to consider, including your spouse’s Social Security, health insurance (a small employer can exclude people over 65 from group coverage), and how your combination of benefits and income will affect your tax situation.
It’s an area where a few key decisions could end up saving tens of thousands of dollars in the long run.
If you’re nearing retirement age or retired and thinking of going back to work, schedule a time to talk with your trusted advisor. He or she can help you explore various scenarios and identify the one that is most advantageous for your unique situation.
Citations:
1 – https://www.nerdwallet.com/blog/investing/need-know-working-retirement/
2 – https://www.ssa.gov/planners/retire/suspend.html
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