Should you work after retirement?

Deciding to start working in retirement can happen for many reasons, such as needing some extra money, realizing you weren’t quite ready to give up work yet, or simply wanting to pursue a new interest or passion. However, as with any big decision like this, there are pros and cons that are important to consider before getting back into work, as well as changes to your lifestyle that you might also take into account. Legally, there’s nothing stopping you from gaining new employment after you retire — it’s just worth understanding how it will impact your life and your benefits moving forward.

Depending on your retirement plan, you may be able to start collecting your full pension at the retirement age the plan defines, even if you’re still working in a full-time role. Other plans may suspend payments until you’ve finished working, even if you’ve reached their stated retirement age. 

The third option is phased retirement. This allows you to work a part-time job from the age of 62, while claiming some or all of your pension benefits. You should note that doing this could lower your final pension payments, especially if you’re on a plan that bases the amount on your earnings in your final years of work, such as a defined benefit pension plan.

If you decide on returning to work after retirement, and go back to the same company from which you’re claiming your pension, they may choose from any of the above options. If you return to work but for a different company, your pension will not be affected by the money you earn.

Your Social Security payments are taxable, but only if they reach certain thresholds. When you retire, if Social Security is your only source of income, you may not be subject to taxes. But if you choose to work after retirement while claiming Social Security, your combined earnings could push you over the taxable limit, which is $25,000 for single filers and $32,000 for married couples filing their tax return jointly.

It’s worth noting that there’s a difference between how working during retirement affects your Social Security benefits and how it affects your taxes. Your earnings could cause a temporary reduction in your Social Security payments if you’re under full retirement age, and separately, your combined income could make part of your benefits taxable.

The below should give you an idea of how your Social Security benefits could be impacted depending on when you start to claim them, and how much extra income you earn. 

• If you start claiming Social Security before you reach your full retirement age, $1 is deducted from your benefits for every $2 you earn above the annual earnings limit, which is $23,400 as of 2025.

• If you start claiming Social Security benefits the year you reach your full retirement age, $1 is deducted from your benefits for every $3 you earn over a higher limit, which is $62,160 in 2025.¹

• If you start claiming Social Security benefits after reaching retirement age, there is no limit on your earnings. Your earnings won’t reduce your benefits, and in some cases, they could even increase future Social Security payments.

For more information on your full retirement age, visit www.ssa.gov.

There is no limit to the amount you can earn by going back to work after retirement. However, if you claim Social Security before reaching your full retirement age, making too much money could temporarily reduce your monthly benefits. If you earn more than $23,400 in a year, Social Security will withhold $1 for every $2 you earn over that limit.

Also, your income from working could make part of your Social Security benefits taxable. If your combined income is over $25,000 (for single filers) or $32,000 (for married couples filing jointly), up to 85% of your Social Security benefits could be taxed.

Once you’re at full retirement age, you’re free to work as long as you’d like after retirement and still receive benefits; no-one can force you to stop working, and you can’t be turned away from work because of your age. But if you return to work, your income could affect the amount you receive from Social Security or a company pension plan. 

If you return to work with the company paying your pension, they may reduce your monthly amount or suspend payments until you finish work. You may also be offered phased retirement, where you’re allowed to work part-time hours while still claiming some or all of your pension. It can help to talk with the HR team at the company paying your pension to understand how returning to some form of employment will impact you. Alternatively, you might use the services of a retirement financial advisor for expert advice tailored to your needs.

While working after retirement can be seen as a necessity for some people, others see the benefits not only for their finances but also their emotional wellbeing.

• You can earn more money to cover your cost of living without using up any retirement savings, allowing you to consider investments or afford more lavish “lifestyle” expenses.

• You can grow your savings to afford a greater retirement later on in life.

• You can increase your financial security. In a volatile market, savings can’t always be solely relied on, so an extra source of income could provide you with a welcome safety net.

• You can maximize your Social Security benefits. For every year you delay withdrawing your Social Security, your benefits will be increased until you reach the age of 70.

• You could be pushed in a higher tax bracket. This may also impact your Social Security benefits, and once you hit the age of 65, your Medicare premiums could be affected too.

• Working during retirement can cut into the time you otherwise might have spent traveling, relaxing, or focusing on hobbies and personal passions. Even part-time work can limit the freedom that retirement is supposed to bring, so it’s important to weigh the trade-off between extra income and having more time for yourself.

By preparing for retirement with a high-yield savings account, you could complement your retirement savings plan and leave yourself with more money to enjoy. Take a look at the top interest rates on the Raisin marketplace today to get started.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Sources

¹https://www.ssa.gov/benefits/retirement/planner/whileworking.html