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For some retirees, returning to work has emerged as an aspiration.
About 1 in 6 American retirees say they are thinking about getting a job, according to a new study from Paychex. On average, “non-retirees” have been out of the workforce for four years.
The top reasons cited by individuals surveyed for the report were “personal reasons” (57%), “need more money” (53%) and “boredom” (52%). “Feeling lonely” (45%) and “inflation” (45%) rounded out the top five reasons for considering employment.
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Over time, the number of older people in the workforce has increased. Among adults aged 65 to 74, the labor force participation rate will be 25.8% in 2021, according to the US Bureau of Labor Statistics. That share is expected to grow to 30.7% by 2031. In the 75 and older crowd, the labor force share is expected to reach 11.1%, up from 8.6% in 2021.
If you find yourself among those retirees who are considering “unretirement,” there are a few things to consider before returning to work.
“I really boils down to this: What is the purpose of this job? To earn money because you need it or just to give you something to do?” said Nicholas Bunio, a certified financial planner with Retirement Wealth Advisors in Downingtown, Pennsylvania.
If you don’t need the income, try to find a less stressful job
If the reason you’re considering a nonfinancial job, you’re not alone.
“Boredom is a big problem,” says CFP David Mendels, director of planning at Creative Finance Concepts in New York.
“A lot of people look down on it,” Mendels said. “Even if you hate your job, it’s a big part of who and what you are.
“And when you break it down, it’s a big problem for a lot of people.”
If you’re looking for work for fun, it’s worth considering a job that is less stressful and offers some flexibility, Bunio said.
“That’s important,” he said. “You’re retired. You’re not building a career.”
Whether you need the income or not, it’s also important to understand how it affects other parts of your financial picture.
Extra payments can reduce Social Security for early claimants
For example, if you tap into Social Security early and haven’t reached full retirement age (as defined by the government), your wage income can reduce your benefits — at least until you reach age 66 or 67, depending on the year you were born.
While delaying Social Security for as long as possible means a higher monthly check, many people take it as soon as possible — at age 62 — or sooner.
If you start checking monthly early, there is a limit to how much you can earn from work without being impacted. For 2023, the cap is $21,240. For every $2 over the limit, $1 is withheld from benefits.
Then, when you reach full retirement age, that money comes back to you in the form of a higher monthly check.
“They give it back to you and that’s a good thing,” Mendels said.
During that time, you can also earn as much as you want from work without affecting your Social Security benefits.
Additionally, if you are an early adopter who is working and you reach full retirement age in 2023, then $1 will be deducted from your benefits for every $3 you earn over $56,520 until the month you reach full retirement age.
Medicare premiums may be affected
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In addition to the additional income from the job that may push you into a higher tax bracket, it may also result in additional costs for Medicare.
Basically, those with higher incomes pay higher premiums for Medicare Part B (outpatient coverage) and Part D (prescription drug coverage). The surcharge begins at incomes over $97,000 for individuals and $194,000 for married couples filing a property return.
Of course, if you get health insurance through a new job as a retiree, you may be able to drop Medicare if possible, depending on your circumstances. While workers at companies with fewer than 20 employees generally must be on Medicare once they turn 65 to avoid paying extra later, people at large companies may have options.
That is, you can take your company’s health plan and drop Medicare — then re-enroll down the road. If you go this route, however, there are many rules and deadlines to be aware of.