Retirement is a common goal, but many factors will affect when exactly you decide to retire. Early retirement incentives, leadership changes or job modifications may make retiring earlier than anticipated an attractive option. You might even find yourself retired for a time—
Can you stop Social Security and go back to work? Indeed, you can "unretire," but there are some potential caveats related to your federal retirement benefits. If you decide to rejoin the workforce, your Social Security payments likely will change depending on how much money you're earning and your age. Let's take a look at what's involved with unretiring.
What to think about before unretiring
The urge to return to work might surface for several reasons. Some people miss the camaraderie and personal fulfillment of working regularly and may want to pursue it part or full time again. Others realize that achieving some of their financial goals might be easier if they had more income. Or an opportunity may arise that calls to your interests or passion that makes working more appealing than retirement.
If you find yourself contemplating a return to work, you're not alone. A recent report from the job search company Indeed found that
How working after retirement affects Social Security benefits
Social Security is structured to provide larger payments the later you choose to retire, and taking benefits early can potentially result in them being withheld later if you choose to reenter the workforce. However, there are plenty of times where the modest offset of one's Social Security benefits may be well worth the combination of income and personal fulfillment that
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If you're younger than full retirement age
In general, choosing to work in retirement before full retirement age may cause a temporary reduction in benefits, but you eventually will see a larger benefit when you "re-retire."
If you retire when you're younger than retirement age but go back to work within 12 months, you can return the benefits you've received and stop receiving more, a complete do-over. You'll then just claim Social Security again when you "re-retire," likely receiving a higher benefit check at that time as a result of being older.
For income earned before full retirement age but after those first 12 months of retirement, you'll have $1 deducted from your benefits for every $2 of earnings above $19,560. Earning less than $19,560 wouldn't affect your benefits.
You will want to
But let's change the details a bit and put the income at $26,000. At more than $6,000 over the limit, that situation means your benefits would be reduced by about $3,000. You'd have to decide whether returning to work is still worth it considering the decrease in benefits.
If it ends up that going back to work would put you out of your financial comfort zone right now, remember that you can use your time in other ways, like volunteering. It's all about looking at your options.
If you have reached full retirement age
Once you reach full retirement age, you will receive your full benefit going forward. There are no more benefit reductions, and if you delay your retirement further past full retirement age, you'll see an even larger payment when you do eventually take Social Security, up to age 70. At these ages, though, there is usually no Social-Security-related downside to returning to work if some combination of the work itself and the income appeals to you.
How benefits may be recalculated
If you have your benefits withheld due to returning to work, you're likely to have your benefits recalculated in the future, and you usually will receive more. If you pay back your benefits so far during those first 12 months, your future benefit will grow because you'll effectively re-do your retirement at an older age.
Also, the benefits you qualify to receive are tied to the top-earning years of your career, so if you unretire and have a year of relatively high income, the SSA may recalculate your benefits. When you begin qualifying for benefits again—or when you reach age 70 and automatically receive benefits—you may see that your monthly benefit is higher.
Other things that may impact your decision to unretire
Make sure that your choice to unretire takes Social Security into account but also keeps in mind any other changes that returning to work might entail.
Potentially delaying required minimum distributions (RMDs)
If you return to work and are eligible for a
If you qualify for a pension, you'll also want to see if your eligibility or payments are affected by going back to work.
Medicare vs. employer-offered health insurance
While qualifying for Medicare Part A when you turn 65 is generally independent of whether you're taking Social Security benefits, it's wise to check with the SSA if you are considering unretiring. For example, if you are eligible for health care coverage through your work after you unretire, you may need to evaluate your Medicare and other available health care options and make a choice with as much information as possible.
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How additional income impacts your tax rates
You'll want to talk to a tax professional about how additional income post-retirement can affect your tax burden. Every situation is different, but higher income is generally taxed at higher rates. Your tax professional can help you determine any applicable deductions or credits in the event you unretire.
How a financial advisor can help
A knowledgeable financial advisor understands the many factors at play in the decision to unretire. If you feel you could benefit from having one take a personalized look at your circumstances, consider reaching out for assistance. Financial advisors can bring a lot of information to the table that may help you decide on an unretirement option that helps maximize what you value, whether it's earning money to travel, working a few hours a week or focusing on any other priorities you have.