Tips for Working in Retirement

It might seem oxymoronic, but many Americans choose to continue working in some capacity during their retirement. In fact, 1 in 6 retirees are considering a return to work, according to a recent Paychex study.

“If you are healthy with no chronic disease, your life expectancy could be as long as 92-plus years old. Therefore, for many new retirees, you may need to reconsider a financial plan of 20-plus years after you reach the so-called full retirement age of 66/67,” says Tenpao Lee, professor emeritus of economics at Niagara University.

Although it might take away from the time you have to travel or enjoy other retirement hobbies, there are several benefits to working in retirement if you follow the right strategy.

For instance, a retirement job might allow you to delay spending your nest egg and give you more time to save for retirement. Older workers are eligible to contribute more money to retirement accounts than their younger counterparts. Working in retirement also affects how much you will receive from Social Security, your tax rate and could result in higher Medicare premiums.

[See: 15 In-Demand Jobs for Seniors.]

Here are 10 tips for making the most of a retirement job:

— Delay 401(k) withdrawals.

— Make catch-up contributions.

— Watch out for Social Security withholding.

— Know that your Social Security benefit could be partially taxable.

— Boost your Social Security earnings.

— Consider delaying your Social Security payments.

— Don’t forget to sign up for Medicare.

— Watch out for higher Medicare premiums.

— Find a better work-life balance.

— Look for a job that pays more.

Delay 401(k) Withdrawals

Traditional IRA and 401(k) distributions are typically required after age 72 and income tax is due on each withdrawal. However, if you continue to work after age 72 and don’t own 5% or more of the company you work for, you may be able to continue to defer withdrawals from your current 401(k) plan (and the resulting tax bill) until April 1 of the year after you retire. However, you will still need to take required minimum distributions from IRAs and 401(k) plans from previous employers.

Continuing to invest your retirement savings makes sense for those with a long retirement ahead of them, Lee says.

“Many financial advisors recommend that retirees should be relatively conservative to invest less in stocks and more in bonds or fixed income securities. It is correct for a retiree with a life expectancy of 10 years or less, as you cannot take the risk of a market downturn. You simply do not have the time to wait for the market to recover. However, for a retiree with a life expectancy of 20-plus years, you probably should invest aggressively for another 10-plus years as you will have time to ride through the market downturn,” Lee says.

Make Catch-Up Contributions

Workers age 50 and older are eligible to make catch-up contributions to retirement accounts and qualify for a bigger tax deduction. Older employees can save up to $30,000 in a 401(k) account in 2023, $7,500 more than younger employees. Making a $7,500 catch-up contribution to a 401(k) plan could save you $1,800 in taxes if you are in the 24% tax bracket. Income tax won’t be due on your traditional retirement account contributions until you withdraw the money from the account.

IRAs also allow older workers to make catch-up contributions worth an additional $1,000 per year.

[Read: How to Take Advantage of 401(k) Catch-Up Contributions.]

Watch Out for Social Security Withholding

If you work and collect Social Security benefits at the same time before your full retirement age (66 or 67 depending on your birth year), part or all of your benefit could be temporarily withheld. If you earn more than $21,240 in 2023, you’ll lose $1 in Social Security benefits for every $2 in earnings above the limit.

In the year you turn your full retirement age, the earnings limit increases to $56,520 and the penalty decreases. For every $3 you exceed the limit, you’ll lose $1 in benefits. However, once you reach full retirement age, there’s no penalty for working while receiving Social Security payments, and your benefit will be increased to reflect your continued earnings.

According to Devin Carroll, managing director of Carroll Advisory Group, it’s important to note that the earnings limit is an individual limit.

“If you are still working, and your spouse is drawing Social Security from their own work record, your earnings will not count toward their income limit,” Carroll says.

Your Social Security Benefit Could Be Partially Taxable

If you earn more than a certain amount in retirement, your Social Security payments could become taxable. Income tax will be due on half of your Social Security payments when the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit totals more than $25,000 ($32,000 for couples).

If these income sources are greater than $34,000 for individuals and $44,000 for couples, up to 85% of your Social Security benefit will be subject to tax. You can choose to have federal taxes withheld from your Social Security benefit or make quarterly estimated tax payments to the IRS.

Boost Your Social Security Earnings

Social Security payments are calculated based on the 35 years in which you earn the most. If you earn a higher salary now than you did earlier in your career, you could boost your Social Security payments going forward.

“If someone files for benefits and then continues to work or returns to work, those earnings will result in a recomputation as long as they replace one of the earnings years in the high 35 calculation,” Carroll says.

This strategy is especially powerful if you haven’t yet worked for 35 years and had one or more zero-earning years factored into your Social Security benefit calculation. The Social Security Administration will automatically adjust your benefit if your additional earned income has qualified you for higher Social Security payments. Earnings up to the taxable maximum, which is $160,000 in 2023, can be factored into Social Security payments.

[Read: What Happens if You Work While Receiving Social Security.]

Consider Delaying Your Social Security Payments

If you continue to work during your 60s and earn enough to pay your bills, you might be able to delay signing up for Social Security. Monthly benefit payments are increased for each month you wait to start collecting your benefit up until age 70. You can increase your Social Security payments by about 8% for each year of delay between your full retirement age and age 70.

These higher payments last for the rest of your life and can be passed on to a surviving spouse who gets a lower payment. Your Social Security statement gives you a personalized estimate of how much you will receive if you start collecting Social Security payments at various ages.

Don’t Forget to Sign Up for Medicare

Medicare eligibility begins at age 65, regardless of your employment status. Remember to sign up for Medicare during the seven-month initial enrollment period that begins three months before the month you turn 65. The government adds a late enrollment penalty to your Medicare Part B and D premiums if you sign up later. The higher premiums for late enrollment last for the rest of your life.

If you are working after age 65 and receive group health insurance through your employer, you need to sign up for Medicare within eight months of leaving the job or the health plan to avoid the penalty.

Watch Out for Higher Medicare Premiums

Working in retirement could result in more expensive Medicare premiums. If your modified adjusted gross income is greater than $97,000 as an individual and $194,000 as a married couple, you will be charged higher premiums for Medicare Part B and Medicare prescription drug coverage.

Find a Better Work-Life Balance

Few retirees want to keep working full time. You might be able to gradually reduce your hours at your current job and phase into retirement. Sometimes retirees take a career break to relax before beginning a new venture.

Most older workers want a flexible schedule, which might mean working part time or part of the year. You might be able to find a temporary or seasonal job that allows you to earn an income while also giving you increased time for hobbies and personal interests. Many jobs now allow you to work from home, which reduces the need for a stressful commute.

Look for a Job That Pays More

Many people continue to work in retirement because they need the money. But in addition to the paycheck, a job provides retirees with opportunities to socialize and physical and mental stimulation.

Consider seeking a job that allows you to develop meaningful relationships with colleagues or the greater community. Some jobs can give you a sense of purpose and the opportunity to help someone else.

A retirement job can be a way to give back to a community that supported you throughout your career and to encourage younger people in their future endeavors.

More from U.S. News

Work-From-Home Jobs for Retirees

10 Fun Part-Time Jobs for Retirement

Great Side Hustles for Retirees

Tips for Working in Retirement originally appeared on

Update 05/26/23: This story was previously published at an earlier date and has been updated with new information.

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