Facing rising inflation, market volatility and a looming recession, 1 in 6 retirees are considering unretiring, according to a survey by Paychex. Needing money (53%) and getting bored (52%) or lonely (43%) were some of the top reasons, as were inflation (43%), stock market volatility (41%) and needing health insurance (39%).
“There are a lot of good reasons to continue working in retirement,” says Elijah Kovar, financial advisor at Great Waters Financial in Minneapolis. “You’re challenged to learn. You have a reason to get out of bed. A lot of people miss the social interactions because so much of their social interactions were at work.”
But before you unretire, you need to consider the following:
— If you started Social Security before full retirement age, your benefits may be reduced.
— Medicare premiums are based on your income and may go up if you increase your income.
— If you are receiving distributions from your pension, you may not be able to stop them.
— You may be pushed into a higher income tax bracket.
— Remote work may not be as available.
— A return to the workforce could be stressful.
— Age discrimination is real.
[Related:How to Unretire]
If You Are Receiving Social Security Before Full Retirement Age, Benefits May Be Reduced
If you begin earning wages more than the cap, which is $21,240, for every $2 earned over that limit you lose $1 in Social Security benefits. But that’s not necessarily a bad thing, Kovar says.
“People will think, ‘I can’t earn over that limit, or I lose Social Security benefits,'” he says. “It’s not an accurate understanding of how it works. The reality is when that benefit is reduced, it’s simply deferred as if you had not turned on the Social Security.”
“Let’s say somebody earned $100,000,” he says. “That would erase their benefits entirely. But it’s just like they hadn’t turned (Social Security) on. They get the 5% to 7% percent boost in benefits annually, and then they receive advantage of increased benefits (when they reach full retirement age) because they are delayed.”
Medicare Premiums Are Based on Income and May Increase
Your monthly Medicare payments may increase. Payments are based on income, and increased earning will mean increased premiums. Higher income earners pay higher premiums for Medicare Part B and Part D prescription drug coverage.
If You Started Distributions From Your Pension, You May Not Be Able to Stop Them
Distributions from defined contribution plans like a 401(k), 403(b) or 457 can be turned off at any time, Kovar says. “If they’ve turned on the benefit from a defined benefit plan like a pension, many times once you’ve turned that on, you can’t just stop it or delay it,” he says. “So that would be a real consideration to be thinking about unretiring.”
[See: 10 Ways to Reduce Taxes on Your Retirement Savings.]
Returning to Work May Push You Into a Higher Income Bracket
As a result, your taxes may increase.
“If you’re collecting a pension, or if you are collecting Social Security and then you get a job, you need to be aware of whether or not that’s going to bump you up to the next tax bracket,” says Robert Gilliland, managing director and senior wealth advisor at Concenture Wealth Management in Houston. “There’s a potential that you could end up having to pay more in taxes.”
“But if I make $100 extra, and that puts me up to that next tax bracket, there’s still more (money) going into my pocket,” he says. “And 95% of the people that I talk to that go back to work after retirement are not doing it for the financial reasons. They’re doing it for the interaction.”
It takes away some of those tax strategies, Kovar says. “So, where somebody might earn $60,000, that comes back to them in the form of $40,000 because of the tax benefits that were lost through some strategic tax planning. It doesn’t mean that they’re worse off financially. You’re always going to be ahead if you earn more money, but you lose some of the benefits through tax strategies.”
Remote Work May Not Be as Available
It may not be as easy to find remote work as it has been over the past few years.
The Paychex survey found that more than half of the retirees who want to return to work would like to work remotely. But a survey by Resume Builder found that 90% of U.S. companies will require workers to return to the office for at least part of the week in 2023.
[See: Expenses You Can Eliminate in Retirement.]
A Return to the Workforce Could Be Stressful
Many retirees left their jobs in the first place for health reasons or to reduce stress.
“I was just on the phone with a client who left his job that was pretty high stress for years,” Kovar says. “He’s thinking about what kind of job he wants to go into right now, and it might be a much lower-paying job with fewer benefits because he just doesn’t want to deal with the stress. If you’ve retired and kind of gotten used to a stress-free lifestyle, and you’re going back to work, that’s a that’s a real concern for a lot of people.”
Kovar says his client, like many who unretire, is doing it for the social interactions. “He’s going to go do nonprofit work,” he says. “People pick low-stress or hobby jobs. A lot of retired guys are going to work the tee box at a golf course. They get the social interactions and get free golf out of it.”
Age Discrimination Is Real
Finding a new job may be more difficult than you thought. AARP says 80% of older workers have seen or experienced age discrimination in the workplace, the highest since the organization began asking the question in 1983.
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1 in 6 Retirees Considering Unretiring originally appeared on usnews.com
