There are many reasons why you might choose to return to the world of work after retiring. Whether your choice to unretire is personal or financial, this unique position will present a lot of changes to your day-to-day. One of the main things you’ll need to consider is how this decision will affect your social security check. In this guide, we’ll lay out the advantages of returning to work, how your social security check will be affected and by what, and how to navigate the experience like an expert.
Why Rejoin the Workforce After You’ve Retired?
It’s quite common for individuals to choose to return to full or part-time work even after they’ve decided to retire. In fact, of people in the workforce aged 65 and over, 40% had previously been retired. Working past retirement age is also becoming a popular choice, and in 2016, 19% of over 65s were in full or part-time employment, compared to 13% in 2000.
But why choose to unretire? The specific reasons are usually unique to individuals, but here are some of the most popular reasons why retirees reenter the workforce.
Less Reliance on Social Security - The main reason why retirees chose to return to their job or continue working past retirement age is to maintain a source of steady income. If you haven’t taken it yet, this also allows you to defer your social security application until you officially retire, so you can save this money for when you most need it.
Social and Mental Fulfillment - Retirement marks a specific chapter in your life, and one of its main benefits is it frees up more time for you to spend with family and friends, and focus on hobbies. However, the social fulfillment individuals receive from workplaces, especially if they work in an industry that aligns with their passions, can be a deciding factor in returning to work.
Increased Activity - Say what you want about working, it can be a great way to keep fit and healthy. However, even being able to leave your house or your neighborhood, meet different people and partake in a range of activities in your workplace is a hugely valid reason to want to return to work.
Your social security check will not be affected by your reasons for returning to work, but being sure of your decision can make the process much easier, and put the potential for lessened social security benefits into perspective.
How Age Affects Social Security When Unretiring…
Your social security check will be affected by the age at which you return to work, whether you have received any social security payments, and of course, your expected annual earnings. For example, if you chose to retire early, but are now returning to work while you’re still under normal retirement age, it will be a little different to someone who is over normal retirement age and has made the decision to reverse their retirement.
Note: You can begin claiming social security benefits at the age of 62, but this is not the same as the normal retirement age. Many industries do not enforce a compulsory retirement age, meaning you can continue working past the normal retirement age with no risk of discrimination. However, it’s worth checking whether the company or industry you will be working in allows people to work past a certain age.
- For those born between 1943 and 1954, the normal retirement age is 66.
- For those born between 1955 and 1959, the normal retirement age is 66 and a number of months depending on the year you were born. For example, if you were born in 1955 your retirement age is 66 and 2 months, and if you were born in 1959, your retirement age is 66 and 10 months.
- For those born in 1960 and after, the normal retirement age is 67.
Below we’ve covered a few different scenarios for unretiring, so you can find out how your payments will be affected, and what the best course of action is for you.
Under Retirement Age, Continuing to Claim Social Security
If you are younger than the normal retirement age in the 12 months before you return to work, and plan on continuing to claim your social security, you will see some deductions in the amount you receive.
The annual income limit for 2023 is $21,240. For every $2 you earn above this limit, you will have $1 withheld from your entitlement. If you are earning above $51,960 in a year, the SSA will withhold $1 for every $3 you earn over this limit.
Once you reach retirement age, you’ll be able to work and claim your full social security entitlement, including any amount that was withheld while you were working and claiming under the age of retirement. To estimate the amount you will receive, you can use the annual income calculator on the SSA site.
Under Retirement Age, No Longer Claiming Social Security
Getting that extra cash injection from returning to work may mean you plan on saving your social security payments for when you next retire. If you are under 70 and are unretiring within 12 months of first applying for social security, you have a unique option to withdraw your application and defer your payments until you want to claim them.
You will need to submit a form to Social Security Administration, and will likely be required to repay any checks you have already received and cashed. However, you’ll still be able to reapply for your full social security amount when you choose to.
Over Retirement Age, Continuing to Claim Social Security
Good news! If you are over retirement age, you can return to work and continue to claim your social security checks with no effect on the amount you’ll receive.
Over Retirement Age, No Longer Claiming Social Security
If you are over the normal retirement age, but still below 70, you have the option to suspend any social security payments you are currently claiming. This way, you’ll be able to continue to earn your annual income, and automatically start receiving social security checks again when you reach 70. That is unless you inform the SSA that you would like your payments to restart at an earlier point.
Other Things to Know About Social Security and Unretiring
The amount of money you receive from social security may not be the only thing that is affected by your decision to unretire. Below we’ve listed some things that you should keep in mind when deciding which path to take.
Self-Employment
You can still complete self-employed or freelance work and be considered officially retired by the SSA. If you are under normal retirement age, as long as your earnings are below $1,630 a month, you can complete freelance work and still receive your full social security check as normal. If you are over retirement age, you can earn up to $4,330 from freelance work while receiving your full social security entitlement.
Just bear in mind that if you want to continue to claim your full social security amount, the number of hours you can spend working will be capped. If you work more than 45 hours a month in your business, or between 15 and 45 hours in a ‘highly skilled occupation’, you may receive lessened checks depending on your age.
Medicare Coverage
If you are 65 or over, you will have been automatically enrolled in Medicare Part A. This coverage will continue regardless of whether you decide to suspend or continue to receive your social security payments.
However, if you are covered in retirement by Medicare Part B or Part D by your social security, and are now suspending your social security payments to return to work, medical premiums and bills that would’ve been covered under social security will fall directly to you. If you are returning to work and continuing to claim social security, even at a lessened rate, you will still receive Medicare Part B and D coverage.
Taxes
Reporting your earnings and claiming social security while over normal retirement age can pose some problems. This is because the amount you’re earning will determine how much of your social security is subject to taxation.
If you’ve decided you want to return to work while still claiming social security benefits, your tax situation will change. If you are filing jointly and earn over $44,000, or filing individually and earn over $34,800, 85% of your social security payments are taxable. If you’re earning under those amounts, 50% of your social security payments will be taxable. This may lead you to suspend your social security payments, or withdraw your current application, to receive the most income and preserve your social security for when you want to claim it.
Conclusion
The number of individuals deciding to unretire is growing year after year. If you want to reverse your retirement and return to work, many people have done the same before you, for several different reasons.
Age is the defining factor in how your decision will affect your social security checks. If you’re going to return to work and continue to claim social security, you will see a certain amount withheld if you’re under normal retirement age and earning over the threshold. If you’re over normal retirement age, you can return to work and continue to claim your full social security amount.
If you have been claiming social security but don’t want to see any withheld as you return to work, if you’re under 70 you have a few different options. Either you can withdraw your application if it’s been less than 12 months since you applied, or, if it’s been more than 12 months since you applied, you can suspend your social security payments for the time being.
Don’t forget that whatever you decide to do with regard to your social security, it could affect your tax bracket and Medicare coverage. It’s always worth seeking help from a financial advisor, or tax advisor, to discuss your options in full and ensure all your paperwork is correct.
Sources
- https://www.bankrate.com/retirement/social-security-benefits-affected-unretiring-work/
- https://www.bls.gov/osmr/research-papers/2020/pdf/ec200110.pdf
- https://www.pewresearch.org/fact-tank/2021/11/04/amid-the-pandemic-a-rising-share-of-older-u-s-adults-are-now-retired/
- https://www.cnbc.com/2021/06/20/how-returning-to-work-after-retiring-impacts-your-financial-life.html
- https://www.cnbc.com/2022/05/05/unretirement-is-becoming-a-hot-new-trend-in-the-sizzling-us-labor-market.html
- https://www.schwab.com/learn/story/working-retirement-how-does-it-affect-social-security-and-medicare
Leave a reply