New Work Opportunities for Retirees: A Fresh Perspective
by Gabriel Lewit
![Retirees are opting to go back to work to stay active and engaged; retiree working in a store.](https://www.sglfinancial.com/wp-content/uploads/2024/05/SGL-Financial-Working-in-Retirement.jpeg)
Retirement traditionally marks the end of a full-time work schedule for yourself or someone else. But increasingly, it’s becoming a phase of life where people blend increased leisure activities with lesser amounts of part-time work. This new approach to retirement planning is reshaping how individuals think about their early post-career years, not just from a financial standpoint but also in terms of personal fulfillment and social engagement.
Redefining work after age 65 offers many opportunities. Whether it’s part-time employment, starting a new business, or consulting, these choices can significantly impact one’s financial well-being and personal satisfaction during retirement.
However, before you take the leap and start a new, part-time career, you should ensure you are properly accounting for how your new opportunity will impact your retirement income and tax situation. We’ll explore these in this blog.
Working with a Buffalo Grove CFP® professional can help tailor these strategies to your unique circumstances, making your transition from retirement to a limited work schedule seamless, both personally and financially.
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Continuing to Work on Your Terms
Many retirees today choose to continue working when they are healthy and motivated, though perhaps not as many hours as they did during their 40s, 50s, and early 60s. This trend shows that increasing numbers of retirees prefer to balance work and retirement activities before they become full-time retirees.
There are a wide range of reasons why more retirees are continuing to work after they retire from a full-time job:
- Some retirees find their retirement savings insufficient to cover their living expenses, healthcare costs, or unexpected financial burdens. Returning to work helps supplement their income and provides increased financial security and benefits.
- Retirement can sometimes lead to feelings of isolation. Many retirees miss the daily social interactions that come with working. Returning to work provides an opportunity to reconnect with colleagues and make new friends.
- Staying active and engaged is crucial for mental health. A new job can keep the mind sharp and provide a sense of purpose.
- After retirement’s initial feeling of freedom is over, many people simply get bored. Returning to work, even in a different capacity, can bring variety, interest, and productivity back into their lives.
- Access to employer-provided healthcare can significantly motivate retirees who are not 65 and do not qualify for Medicare yet. Having a job with benefits can ease the financial burden of medical expenses.
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The Financial Impacts of Working Part-Time
Many retirees are taking on part-time jobs, which can particularly appeal to those not ready to transition from full-time work to full-time leisure. However, these same individuals may want less stress by working fewer hours at a job that is easy for them.
You should review your work plans during retirement with a financial advisor in Buffalo Grove to discuss the financial and tax implications of an additional income stream.
By understanding the financial impact of part-time work, you can make a more informed decision about whether working 20-30 hours per week in retirement is the right choice for you.
The ideal part-time work is more mental than physical.Following are a few considerations for you if you are contemplating a return to work during post-retirement:
Financial Considerations:
- Part-time work can supplement your retirement income, reducing the amount you need to withdraw from your retirement savings. This approach can help you reduce the risk of depleting your retirement assets and feel more secure about your financial future.
- Working may allow you to delay taking Social Security benefits. Delaying the start of Social Security can increase your benefits by up to 8% per year from full retirement age (67) up to age 70, further enhancing your long-term financial security.
- Many retirees work part-time to gain access to employer-sponsored health insurance. This can be a cost-effective way to manage healthcare costs before becoming eligible for Medicare.
- Earning a part-time income may require adjustments in your tax planning. Effectively balancing your income sources can help manage tax liabilities, especially when coordinating withdrawals from retirement accounts with part-time earnings.
Tax Considerations:
- Part-time work will increase your taxable income, which might bump you into a higher tax bracket and impact your overall tax liability.
- If you already receive Social Security benefits, earning additional income could affect your net benefit. Depending on your age, your benefits might be temporarily reduced if your earnings exceed certain limits.
These limits are set to help balance income while ensuring benefits aren’t excessively reduced for those still working. If you plan to continue working while receiving Social Security benefits, keep these thresholds in mind:
- For 2024, Social Security income limits have specific rules depending on your age and employment status.
- If you’re under full retirement age for the entire year, the earnings limit is $21,240. If you earn more than this, Social Security will deduct $1 for every $2 you earn above the limit.
- If you reach your full retirement age in 2024, the limit increases to $56,520 for the months before you hit FRA. In this case, Social Security will deduct $1 for every $3 you earn above the limit.
- Once you reach full retirement age (67), your earnings are unlimited, and your benefits won’t be reduced.
- Working part-time won’t affect the Required Minimum Distributions (RMDs) from your retirement accounts, but it’s important to remember that any withdrawals you make will be added to your taxable income for the year.
- Check if your part-time work affects any pension or retirement benefits. Some plans have specific rules about working while receiving benefits.
Entrepreneurship and Consulting in Retirement
Retirement might be the perfect time to start a dream business or shift to consulting work, particularly in a field where you’re already an expert. Starting a business or consulting can be fulfilling and financially rewarding. They let you control your workload and maintain professional relevance with your network.
- Consider how this income fits into your broader financial picture when planning this transition. You want to ensure you receive tax guidance that addresses both the business and personal sides of the equation.
- Earnings from a business or consulting can affect how you draw from retirement accounts. Strategic planning can help optimize your income streams for tax efficiency and longevity.
Planning for a Retirement That Works Best for You
Working during retirement, whether part-time, through consulting, or running a business, requires thoughtful preparation:
- Create a detailed retirement budget that includes your part-time or consulting work income. Understanding your cash flow should prevent unnecessary distributions from your retirement assets, thus extending the life of the money you saved for retirement.
- While your new job will provide supplemental income, you should still ensure you have the right risk exposure for your invested assets.
- Create a positive balance between work and leisure that can transition with increasing age and physical considerations.
About SGL Financial
SGL Financial, serving clients in Buffalo Grove, IL and across the country, is a trusted team of fiduciary financial planners dedicated to your financial well-being. Many of our team members hold the prestigious CERTIFIED FINANCIAL PLANNER™ (CFP®) designation.
Our fiduciary duty means we always act in your best interests, providing transparency and personalized financial planning services.
Whether you’re looking for investment management, retirement planning, or estate and legacy planning, SGL Financial has the expertise to help you make your financial goals a reality.
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