Finances in Retirement - Investments

Considering Coming Out of Retirement and Returning to Work? Here are Three Details to Keep in Mind

by Alli Thomas

Aug 19, 2022

For some people, retirement isn’t all it was cracked up to be. Whether they miss the social, emotional, or financial aspects of having a job, some retirees decide to come out of retirement and re-enter the workforce.   

According to the Bureau of Labor Statistics, about 1.5 million American retirees between the ages of 55 and 64 (representing about 3% of the retired population) have gone back to work since the start of the COVID-19 pandemic.  

If you’re considering unretiring and returning to work, here are three details to keep in mind as you begin your transition back into the workforce, especially for older retirees: 

Your Social Security benefits may change  

If you decide to go back to work and you’ve already been collecting Social Security, notify the Administration as soon as possible so your benefit amount will be adjusted in a timely way. Otherwise, your benefits may come to a halt and you may face penalties if you haven’t reached Full Retirement Age.  

You may have to keep taking required minimum distributions 

If you’re nearing age 72 and still working, you’ll still need to take an annual required minimum distribution (RMD) from any pre-tax retirement plans that are NOT associated with the job you take. If you don’t need the income from the RMD, consider alternate uses for it that can help lower your tax bill such as making a qualified charitable donation.

There may be an impact on your Medicare benefits

If you’re currently on Medicare and your new employer offers comparable health coverage, you may opt to drop Medicare coverage and re-enroll at a later time without penalty. But if your employer health plan isn’t considered acceptable primary coverage, you may face a penalty when you re-enroll in Medicare down the road. Conversely, you may also choose to keep Medicare coverage as well as sign up for your employer’s health plan at the same time; one would be considered your primary coverage and the other your secondary. If you do this, however, you won’t be eligible to contribute to a Health Savings Account. One major factor that may help with your decision to keep or drop Medicare is whether you currently have any pre-existing medical conditions that would make it hard to re-enroll in Medicare later.   

Speak with a financial expert before unretiring 

Because of the potential short- and long-term financial implications of coming out of retirement, it’s a good idea to consult a financial advisor about your own personalized unretirement plan before you brush up your resume and start sending it out. That way, you won’t have to worry about unexpected tax bills or reductions in Social Security benefits.  

Our advisors are ready to help you get in the best possible place to re-enter the working world. Click here to set up a free, no-obligation meeting to discuss your financial situation. 

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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