I’m a Financial Advisor: Here Are 4 Money Moves To Make If You Decide To Unretire
Written by
Yaël Bizouati-Kennedy
Edited by
Cory Dudak
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The retirement landscape has shifted significantly since 2020, including many Americans “unretiring.” And if you’re considering taking this step, you’re not alone in having second thoughts. According to an Indeed Flex survey, a whopping 20% of Americans have returned to work due to the cost of living spike. Meanwhile, one-third of retirees are considering between one and three shifts of temporary work per week, according to the survey.
Yet, if you’re pondering unretiring, there are several factors to consider, and money moves to be as successful as possible.
“There are many reasons to rejoin the workforce after retiring, including needing additional income and/or experiencing financial setbacks, finding purpose in working, being able to fill up your days or having access to a community,” said Steve Sexton, CEO of Sexton Advisory Group. “That said, it’s important to consider the financial costs of returning to work after retiring.”
Here are some steps to set yourself up financially if you decide to rejoin the workforce after retiring.
Social Security and Medicare
According to Sexton, for example, if you’ve already started collecting Social Security benefits, it is imperative to understand how returning to work impacts your monthly benefit payments.
“If you haven’t reached full retirement age and you’ve already started collecting Social Security benefits, your benefits may be withheld or you may be asked to pay back benefits you’ve received,” Sexton said. “If you’re already at full retirement age and choose to return to work, your benefits won’t be affected. If you’re below the full retirement age and considering going back to work, the earnings test can help determine how your benefits are impacted.
In addition, if you’re on Medicare, it’s also critical to consider whether working would impact your healthcare coverage — especially if your plan premiums are being deducted from your social security benefits check.
“Know that if you’ve applied for Medicare Part B and choose to keep this coverage upon returning to work, you’ll be billed for future premiums,” Sexton said.
If you plan to rebuild your financial reserves and hopefully retire again, Sexton recommended prioritizing positions that offer a 401(k) retirement benefit with employee matching, which can accelerate your path to financial security in retirement.
Reassess your Financial Situation
An important step is to reassess if you have enough savings to sustain yourself until you receive income from your new job.
“It’s also important to review your health insurance coverage and any retirement benefits that may be impacted by returning to work,” said Michael Collins, CFA, CEO and founder, WinCap Financial.
Next, create a budget for your new lifestyle accounting for potential changes like commuting costs, work-related expenses and possibly higher taxes.
“This will help you estimate how much income you will need from your new job and how much you can contribute towards savings or other financial goals,” Collins added.
Are There Any Tax Implications?
Another factor to consider when rejoining the workforce after retiring is that there may be some tax implications to consider.
“Depending on your age, income level and type of retirement account withdrawals you may receive, there could be tax consequences,” Collins said.
For example, if you are over the age of 70.5 and have a traditional IRA or 401(k), you may be required to start taking minimum distributions which could impact your overall tax liability, he said, noting that it’s also important to keep in mind that any additional income from working could push you into a higher tax bracket.
“Consult with a tax professional before making any decisions to understand how returning to work may affect your taxes,” Collins said.
Planning for Eventually Retiring Again
Finally, you should also plan for retiring — again. In turn, experts said there are a few steps to take to be prepared.
First, set new retirement goals.
“Determine your new retirement goals, including your desired retirement age, lifestyle and financial needs,” said Tyler Meyer, CFP, founder of Retire To Abundance. “This will help you create a new retirement plan that aligns with your current situation and future aspirations.”
In addition, you should ensure that you have a robust emergency fund to cover unexpected expenses or periods of unemployment.
“This fund will provide financial stability and peace of mind as you transition back into the workforce and eventually retire again,” Meyer added.
He also recommended consulting a financial advisor to help you navigate the complexities of unretiring and planning for a second retirement.
“They can provide personalized advice on managing your income, investments, taxes and retirement accounts to ensure you’re making the most of your financial opportunities,” Meyer said.
Finally, he also suggested maintaining a flexible investment strategy to reflect your new financial situation and risk tolerance.
“A diversified portfolio that balances growth and income can help you achieve your retirement goals while managing risk,” he said.
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