People return to work after retiring for a number of reasons. One common reason is financial necessity, something that can happen to those without a solid retirement plan or whose expenses end up being higher than anticipated. Another reason is boredom or a desire to do something more with their time, something returning to the workforce can provide.
If you’re thinking about unretiring, there are a few things you should know, such as how returning to work could affect your Social Security or Medicare benefits. Along with this, unretiring can also come with its own challenges. Before you start applying for jobs, here are some things to consider.
Unretiring Could Affect Your Government Benefits
Going back to work could impact your Social Security and Medicare benefits. The exact impact depends on several factors, such as your age and income.
“If you’ve been collecting Social Security but then decide to go back to work, your age and earnings could determine if your benefits will be affected,” said David Triana, account executive with PR firm, Delight Labs. “Your Social Security benefits could be reduced if you’re below your full retirement age and decide to go back to work.”
People can start collecting their Social Security benefits when they’re 62 years old, but the full retirement age is 66 or 67 years old, depending on when you were born.
“While your benefits could be temporarily decreased, that doesn’t mean that those benefits are permanently lost,” added Triana. “That amount will be added back once you reach your full retirement age. Of course, if you’ve reached your retirement age and then decide to go back to work, there’s no limit on how much you can earn and your benefits won’t be affected.”
“If you’re younger than full retirement age and earn more than the yearly earnings limit, your benefit amount may be reduced. For every $2 you earn above the annual limit, $1 is deducted from your benefit payments,” added James Allen, CPA, CFP, CFEI, founder of Billpin.com. “It’s like a seesaw; as your earnings go up, your benefits might go down, but once you reach the balance point of full retirement age, you’re free to earn as much as you like without affecting your benefits.”
One thing to keep in mind is that your Social Security benefits are not impacted by military retirement benefits, pensions or investment income.
Unretiring may also affect your Medicare benefits, depending on your earnings amount. “If your income as a single person exceeds $97,000, or $194,000 if married, your [Medicare] Part B will increase,” said Steve Sexton, CEO at Sexton Advisory Group.
You Could Request a Withdrawal or Suspension of Benefits
When you return to the workforce after receiving Social Security benefits, you may be able to temporarily suspend your benefits or apply for a withdrawal of benefits. Both options have their merits and drawbacks, as well as requirements.
“If you claimed Social Security retirement benefits within the previous 12 months, you can apply for a ‘withdrawal of benefits’ and Social Security will require that you repay what you received,” said Sexton. “Social Security will then treat your application as if it never happened.” To do this, you’ll typically need to fill out form SSA-521, which requires you to clearly indicate which benefits you want to withdraw from and why.
The other option is to request a suspension to your benefits, something you can only do if you’ve already reached the full retirement age. When you do this, you won’t be required to pay back what you’ve earned. You’ll stop receiving benefits until you reapply for them.
“When you suspend benefits, your account will earn delayed retirement credits for each month the benefits are suspended,” said Sexton. “Please keep in mind that any family members that are receiving benefits based off your benefits will stop receiving their benefits once you suspend your benefits. The only exception is divorced spouses, who will continue receiving benefits even if you suspend yours.”
If you suspend your Social Security benefits and have reached full retirement age, your medical expenses will no longer be deducted from your monthly payment. This means you’ll need to pay them out of pocket.
Returning to the Workforce Can Be Tricky
While understanding your benefits and how unretiring could affect them is important, it’s also essential to consider the bigger picture when unretiring. Returning to the workforce after not working for a period of time — especially if you’ve been away for several years — comes with its own challenges that people don’t often think about.
Technological Advances Lead to Knowledge Gaps
“Returning to the workforce after retirement can be like jumping back into a game of double dutch — the ropes are still turning, but the rhythm might have changed,” said Allen. “One of the main challenges is the potential for a skills gap, especially with the rapid advancement of technology. It’s like being a master at using a typewriter, then suddenly needing to operate a high-tech computer.”
Age Discrimination Can Still Occur
“Another challenge is the potential for age discrimination which, while illegal, can still be a subtle undercurrent in some hiring processes,” added Allen. For those who end up in a less senior role, having superiors who may be much younger can lead to additional stress at work.
“The best thing that retirees can do is be sure that the job they’re looking for suits their needs and/or preferences and talk to other people who have gone through this transition,” said Triana.
It Can Be a Major Lifestyle Adjustment
There’s also the fact that, for many people who unretire, it can be a significant change in their lifestyle. “There’s the adjustment to the pace and structure of working life after the freedom of retirement,” said Allen. “It’s like going from a leisurely stroll in the park to a timed lap on the track.”
Despite the potential challenges and impact to their Social Security benefits, many people successfully return to the workforce after retiring.
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