retirement job

Benefits of a Retirement Job

Believe it or not, many Americans make the choice to continue working to some extent during their retirement. Having a part-time or seasonal retirement job could be a viable method for generating more retirement income. Remember: if you’re generally healthy and suffer from no chronic illnesses, your life expectancy could be higher than 92 years. This might be an issue for many retirees who only planned for a 20+ year retirement. So, continuing to work as a means of generating more income could be beneficial.

There are numerous benefits to continuing work. A retirement job may allow you to delay withdrawing your savings, which, in turn, may give you more time to save up for retirement. In the case of some types of retirement accounts, older workers are eligible to contribute more money than younger workers. And, assuming you’re past full retirement age, you may be able to start taking Social Security benefits while also receiving income from working. Or, you may want to delay taking Social Security benefits in order to get more out of them later in life. Keep reading for more detail. Today, we’re going to dive into the reasons why you may want to consider working during retirement. In order to make the most of your retirement job, you should:

Delay Your 401(k) Withdrawals

Traditional IRA and 401(k) plan distributions are typically required after you turn age 72. And, income tax is due on each withdrawal. These are called required minimum distributions, or RMDs. However, you may be able to delay RMDs if you continue working after reaching age 72. As long as, that is, you don’t own 5% or more of the company you work for. In this instance, you may be able to defer withdrawals from your account until April 1st of the year you retire. You will, however, still need to take RMDs from 401(k) and IRA plans from prior employers.

Make “Catch-Up” Contributions

Traditional 401(k) and IRA distributions are typically required after you turn 72, and income tax is due on each withdrawal. These are called required minimum distributions (RMDs). However, if you continue working after reaching age 72 and don’t own 5% or more of the company you work for, you might be able to continue to defer withdrawals from your plan. This can be done until April 1st of the year you retire. You will still need to take RMDs from 401(k) and IRA plans from previous employers.

Boost Your Social Security Benefits

Social Security payments are calculated based on 35 (not necessarily consecutive) years of your career during which you earned the most. If you earn a higher salary now than you did earlier in your career, you may be able to boost Social Security. If you file for benefits and then continue to work (or get a part-time retirement job) those earnings will result in a recomputation. This, provided they replace one your years of earnings in the 35-year calculation. This tactic is especially useful if you haven’t yet worked for 35 years and, as a result, have one or more “zero-earning years” factored into your benefit calculation. If your additional earned income from your retirement job qualifies you for higher payments, the Social Security Administration will automatically adjust your benefit.

Consider Delaying Social Security Payments

If you continue working into your 60s and earn enough to pay the bills, you may want to delay taking Social Security benefits. This is because your monthly benefit payments are increased for each month you wait to start benefits–the longer you wait, the bigger the benefits will be waiting for you later down the line. This caps after age 70, however, so you should go ahead and start taking benefits by then. These higher payments last for the rest of your life, and they can be passed on to a surviving spouse who gets a lower payment. Your Social Security statement may give you a personalized estimate of how much money you will receive if you begin Social Security payments at different ages. 

Sign Up For Medicare–But Watch Out For Higher Premiums

Three months before the month you reach age 65, you will become eligible to sign up for Medicare, regardless of your employment status. Remember to sign up for Medicare during your seven-month initial enrollment period, or the government will add a late-enrollment penalty to your Medicare Part B and D premiums if you sign up too late. And, unfortunately, these higher premiums for late enrollment will last the rest of your life. If you continue work after turning 65 and receive group health insurance through your employer, you will need to sign up for Medicare within eight months of leaving this job or the health plan in order to avoid penalty.

Important to note: your retirement job could result in more expensive Medicare premiums. If you earn more than $103,000, you will have to pay higher monthly rates for Medicare Parts B and D. It’s $103,000 if you’re single, by the way, $206,000 if you’re married. In 2024, your costs for Parts B and D are based on the income of your 2022 tax return.

Find a Better Work/Life Balance

Most people don’t want to have to keep working for the rest of their life. However, you might choose to gradually reduce your hours at your current job, slowly phasing into retirement. Or, you might choose to take a break from work only for a while. Then, you could get a new, part-time retirement job. Most older employees are going to want a more flexible schedule in order to properly enjoy their retirement. So, you may want to find a temporary or seasonal job. This may allow you to earn some more retirement income, while also giving you far more time to enjoy your hobbies and spend quality time with family and friends than a full-time job. Furthermore, many jobs now allow you to work from home. 

Learn more about the benefits of having a retirement job here.

Source: U.S.News.

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