Working In Retirement
Why Would Someone Work While Retired?
The main reason why someone works when retired is to earn additional money. After retiring, you may find that the pension is not keeping up with inflation or that the income off of your retirement nest egg is too low to cover your expenses. Conversely, returning to work at least part time may be a necessity to cover medical bills or the loss of pension income at the death of a spouse when that person didn't have a survivor's benefit on the pension.
The only options in this situation are to live off less money, sell principle to fund living expenses today or work. Some people who retired to care for a disabled family member return to work to find purpose and community.
Retirement can be an opportunity to try the career you always wanted but did not pursue due to finances; once there is a stream of retirement income, it becomes possible to take a lower paying job as a teacher, work as an artist or write the great all American novel. Or open the business you always wanted to run. However, unexpected medical expenses or home repairs can absorb much of someone's savings, forcing them to return to work to pay the bills.
Long term care costs thousands of dollars a month. The partner not in long term care may be forced to work during retirement because all of the couple's assets are going to pay for the long term care.When someone retires on a pension and then sees the pension benefits cut after the pension is taken over by the Pension Benefit Guarantee Corporation, they may need to find another job in order to make enough money to pay the bills.
Working While Collecting Government Retirement Benefits
Social Security benefits are reduced when you work after retirement, defined as when you start collecting SSI. When you are below full retirement age, generally between ages 62 and 66, your Social Security benefits are reduced by one dollar for every two dollars that you earn.
If you have reached full retirement age, around age 66 or 67, your Social Security benefits are reduced by one dollar for every three dollars that you earn. Working part time to generate supplemental income is a fair trade off, allowing you to increase your annual income without losing your Social security benefits. These limits do not affect you if you are not yet collecting Social security. They will affect you if you are collecting Social Security in your own name or survivor's benefits.
Retirement account withdrawals such as required minimum distributions from your 401K or IRA are not reduced because you choose to work in retirement. However, the retirement plan distributions combined with your income could land you in a higher tax bracket.
Pension Plans and Working in Retirement
You can delay collecting a private pension past official retirement age if you choose to continue working. Pensions do not reduce their benefits when you are working after you have officially retired if still employed, and your pension pay out may actually increase if you delay collecting it.
However, your pension plan may reduce its pay out to you if you are in paid employment while "retired" and collecting from the pension plan. Contact the plan administrator to find out the impact if you work after officially retiring from your prior employer.
If you are collecting a pension upon retirement, there may be restrictions on where you can work. If you are collecting a teacher's pension from one school district, you generally cannot go to work for another school district. Contact your pension plan to find out if you can continue collecting the pension if you return to work, either for your prior employer or a different company. However, volunteer work will never affect your pension payments, and part time work for a different employer rarely affects your pension benefits.
If you have retired as a civil servant, your pension payout may stop if you start working in another municipality. Government pension plans rarely allow you to retire from the federal government and work for the state, or leave one government entity and work for another. You may be able to retire as a firefighter or police officer and work in another civil service position. Speak with an expert in this area to determine the impact of working after retiring from the force.
