How To Potentially Increase Social Security Benefits After Retirement
Once you stop working, your income likely comes from savings, investments and retirement benefits. As a result, it can help to understand how to potentially increase Social Security benefits after retirement. The choices you make could affect your retirement income for the rest of your life.
Financial Reasons To Work
Working in retirement offers many benefits, but not all are keen to partake in them. Unfortunately, many people who dont want to continue working must do so for financial reasons. In fact, most people working post-retirement cite financial issues as the primary reason they remain in the workforce.
Here are the main financial reasons people work during retirement:
6. Your Savings Arent SubstantialSaving for retirement can be difficult, and many people simply have nothing set aside. If youve arrived at retirement age without much in savings, continuing to work or getting another position may be necessary.
7. You Want to Delay Receivng Social SecurityThe longer you wait to receive Social Security payments, the bigger your eventual monthly check will be, up to your full retirement age . If you can remain in the workforce longer and delay receiving your Social Security checks, youll be able to collect bigger monthly payments for the rest of your life, which can really add up.
Similarly, if you are able to delay tapping into your 401k or IRA, it will give those accounts more time to grow, and you could ultimately have a bigger nest egg built up when you do start withdrawing.
9. Your Investments Have Lost ValueThe volatility of the stock market can adversely affect many people counting on investments to retain or gain value. If youve lost money due to poorly performing stocks or the dip in the housing market, you may be left in a bad financial position.
Social Security Rules For Retirement And Benefits
If you retire and begin to receive benefits before your full retirement age as defined by the Social Security Administration, your Social Security benefits may be reduced by as much as 30%, depending on the year you were born.
By working full or part time, you can delay the start of Social Security benefits. The longer you wait, up until the age of 70, the bigger your monthly Social Security check will generally be.
However, if you are already receiving Social Security benefits and decide to work, be aware that in 2020 if you make more than $18,240 prior to your full retirement age, $1 for every $2 made will be deducted from your Social Security benefit. In the year of your full retirement age, Social Security will deduct $1 for every $3 you earn after $48,600 they only count your earnings up to the month before your full retirement age, not after. See ssa.gov for full details.
Once you reach full retirement age, you can work as much as you like without impacting your Social Security benefits. However, you should consult your tax adviser regarding the tax consequences of such work arrangements on your Social Security benefits.
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Risks Of Working After Retirement
Added stress. If you choose the wrong job, you may feel drained physically and emotionally.
If you decide to take on a part-time job and end up stressed and fatigued, donât feel funny about resigning from it. Look for another job thatâs a better fit.
Unintended financial impacts. Before you pick up a part-time job during retirement, talk to a financial advisor to make sure that working wonât hurt you financially. Consider your retirement accounts, Social Security, health benefits, and even tax implications.
Less free time. Some companies allow more flexibility to retirees, but not all of them do. You may need to request time off in advance.
If you looked forward to setting your own schedule in retirement, a part-time job may keep you from doing what you want, when you want.
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Staying Safe At Home And Work With A Medical Alert System
Whether you choose to work through retirement or stay at home, youll want to feel secure in your decision. Part of that should come from understanding your emergency support system. The medical alert systems from Alert1 are a great way to provide care in the case of an emergency, both at home and on the job. We have a range of medical alert systems designed to support senior lifestyles, no matter which you may choose.
You May Need To Do Some Planning With Any Employer Health Insurance
Eligibility for employer-offered group health insurance is one of the primary reasons many people under age 65 stay in, or return to, the work force. If you’re 65 or older and already covered by Medicare, check with your employer’s human resources department about how their insurance coverage would work with your Medicare. In short, Medicare could help pick up the tab for expenses not covered by your group plan, but the rules vary depending on how many employees your employer has. For more information, read “Medicare and Other Health Benefits: Your Guide to Who Pays First.”
If you have private health insurance, compare your benefits and coverage with plans offered by a new employer. Although group plans tend to be less expensive than individual policies, you could be better off keeping your individual policy rather than canceling it and hoping you can get your old coverage and rates back later.
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Pros & Cons Of Working After Retirement
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Its easy to assume that retirees are happy to leave the workforce to pursue more leisurely activities when it comes time to retire, however a growing number of Americans are opting to incorporate work into their golden years.
Nearly half of American seniors plan on working part time or picking up a side job during retirement, according to the American Advisors Group. You may wonder what the pros and cons are. This article will outline the advantages and disadvantages of working after retirement.
C You Can Continue Working And Not Receive Your Retirement Benefits
If you decide to continue working and not start your benefits until after full retirement age, your benefits will increase for each month you do not receive them until you reach age 70. There is no incentive to delay filing for your benefits after age 70. Continuing to work may also increase your benefits, because your current earnings could replace an earlier year of lower or no earnings, which can result in a higher benefit amount.
If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Original Medicare three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
However, if you or your spouse are still working and covered under an employer-provided group health plan, talk to your personnel office before signing up for Medicare Part B. Once the covered employment ends, you may be eligible for a Special Enrollment Period to sign up for Part B. If so, you wont have to pay a late enrollment penalty.
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Bolstering Your Financial Security
Financial security is the top concern for most seniors, regardless of the size of their retirement savings. Living on a fixed income through Social Security can be difficult, and adding varied income streams to your long-term investments can help bolster your finances. Additionally, the longer you wait to receive Social Security payments, the bigger those monthly checks will be. If you stay in the workforce longer, you will increase your fixed income payments down the road.
Importantly, those who choose to work through retirement may do so because they have not had the opportunity to save for retirement. Working a full- or part-time job can help mitigate the stress of living on a small savings account. Plus, some elderly workers may be eligible for health insurance benefits through a job. In some cases, you might even have partial or total coverage for a medical alert system.
Working While Collecting Social Security
If your Social Security benefits are your only source of income, they are generally not taxed by the federal government. However, if you work while receiving Social Security, or receive income from other sources , part of your Social Security benefits may be taxable.
Social Security benefits are subject to tax if the persons combined income exceeds certain limits. Up to 85% of Social Security benefits can be taxed.
In addition, if you work after retirement and you start receiving Social Security benefits, your monthly payments may be affected, depending on your age.
The key is how close you are to full retirement age, which varies from 66 to 67 depending on the year of your birth. For people born 1943 to 1954, the full retirement age is 66, and it’s 67 for people born in 1960 or after. You can find your full retirement age at socialsecurity.gov.
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Cash Retirement Benefits: Younger Than Full Retirement Age The Entire Year
For individuals working after early retirement, benefits amount reductions apply if the retirees earnings exceed $18,240 per calendar year. The SSA reduces cash benefits by $1 for every $2 of employment income above the annual limit cap.
Assume Juan, who is 62, files for Social Security benefits on January 1. Thats also his birthday. In terms of benefits, hes entitled to $600 a month . Further, assume Juan plans to keep working. His scheduled earnings are $1,933 a month in covered employment wages.
$23,200 is $4,960 above the annual earnings limit. Therefore, Juan would lose $2,480 in Social Security benefit payments .
The SSA does not withhold a bit from each check. Instead, Juan would receive no money from January through May. Beginning in June, he would receive $600 per month. Mathematicians might notice that Juan should have received some money as a pro-rata portion of his May Social Security benefits. Sometime during the next calendar year, the SSA will pay the residual benefit amount to Juan.
Social Security And Taxes
Working in retirement could impact both social security benefits and the amount you owe in taxes.
Before reaching full retirement age, youre facing a reduction in social security benefits.
In addition to that, if your combined income is over the threshold, you can expect to pay taxes on security benefits, state and federal income, and medicare.
And depending on how much you earn, the percentage of income that Social Security replaces varies.
For instance, for a 65-year old in 2020 that meant a difference between 26-53% of income replacement:
In a nutshell, before taking a new job, consider the financial implications and plan accordingly.
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How Does Income Affect Social Security Payments
If you begin Social Security when you are
| In the years before you reach full retirement age | In the year you turn full retirement age | Older than full retirement age |
|---|---|---|
| $1 is deducted from your benefits for every $2 you earn above the annual earnings1 limit | $1 is deducted from your benefits for every $3 you earn over the limit | No limit on earnings1 |
| Annual earnings limit: $51,960 in 2022 |
If you retire during a year in which you have already earned more than the yearly earnings limit, you may receive a full Social Security check for any whole month you are considered retired , regardless of earnings prior to retirement.
How Much Will Your Retirement Benefit Be
Your retirement benefit is based on your average earnings over your working career. Higher lifetime earnings result in higher benefits, so if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily. Your age at the time you start receiving benefits also affects your benefit amount. Although you can retire early at age 62, the longer you wait to retire , the higher your retirement benefit.
You can find out more about future Social Security benefits by signing up for a my Social Security account at the Social Security website, ssa.gov, so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If youre not registered for an online account and are not yet receiving benefits, youll receive a statement in the mail every year, starting at age 60. You can also use the Retirement Estimator calculator on the Social Security website, as well as other benefit calculators that can help you estimate disability and survivor benefits.
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Working After Retirement Can Ease Boredom
Taking on work after retiring can combat boredom after turning in the office keycard. While many people are counting down the years to retirement, some may be caught off guard when they are left with decades of free time.
Retirees may be used to going to a job that provides mental stimulation. A change in that routine could result in boredom when a retiree is suddenly faced with filling long days with no plans.
Going back to work after retirement may help to ease some boredom. Some retirees might choose to return to an old passion, pick up a new job to learn new skills, or even take on a job focused on charity or giving back. Working part-time in retirement might give a retiree the excitement of a job, combined with the benefits of a more flexible schedule.
Why Is Social Health Important
Many seniors struggle to maintain meaningful social connections in old age. Reading and exercising are great ways to keep the mind and body in shape, but working can further improve those functions. Seniors who work after retirement typically remain more socially connected and active. This, in turn, can lead to overall health benefits, both physical and mental. A study conducted by the University of Oregon found that working through retirement may increase your overall life expectancy. The researchers found this was likely tied, however indirectly, to increased happiness and physical activity.
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Social Activity And Health Benefits
Exercise, reading and crossword puzzles may provide the stimulus to help stay fit mentally and physically, but working is also an excellent way to stay engaged.
People who work after retirement often remain more active and socially connected, which can mean better overall health and fewer medical issues. Working part-time can give you a sense of being part of something without being tied to a career and long hours.
Working After Retirement Can Provide More Retirement Savings Or Income
The most fundamental financial consideration of having a full- or part-time retirement job is that you are earning money. Working in retirement could enable you to continue saving money and therefore better your quality of life once you do stop working. Studies show that less than 50 percent of retirement-age-households actually have adequate savings to maintain their quality of life in retirement.
It is likely that you will need the extra money. If you are unsure if you have enough or not, use the NewRetirement Retirement Planner to find out how long your savings will last in retirement.
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Reasons To Continue Working After Retirement
When you picture yourself in your golden years, are you sitting on a beach, hitting the golf course, or working behind a desk? For many people of retirement age, continuing to work makes perfect sense.
However, this doesnt mean that you cant balance your work life with enjoyable activities, such as vacation and family visits. Instead, going back to work can be a complementary activity to a fulfilling life. And whether its done voluntarily or out of necessity, working after retirement can offer many benefits. In fact, check out some of the best job ideas for retirees.
Working In Retirement May Change Taxes
In addition to changes to benefits, working in retirement could change the amount you owe in taxes. Social Security benefits might be taxed if a retiree has a combined income over a certain threshold. This includes income, nontaxable interest, and up to 85% of Social Security benefits.
Suppose a retiree files their taxes individually, and their combined incomeadjusted gross income plus nontaxable interest and up to half of their Social Security benefitis between $25,000 and $34,000. In that case, they could be taxed on up to 50% of their Social Security income.
If a combined income is more than $34,000 thanks to working after retirement, they might be taxed on up to 85% of their Social Security benefits.
Of course, workers taking jobs after retirement will also have to pay normal state and federal income taxes on the income earned in their new, post-retirement jobs. They will also have to pay Social Security and Medicare taxes.
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