Here's What to Consider
If you're thinking about working in retirement, you must consider a few things before making your decision. As you get older, the question of when to collect Social Security retirement benefits and how your monthly payment may be impacted by working is essential. Here's what to consider before making your decision:
The reason you want to work in retirement
Perhaps you enjoy working and want to continue part time. Or, you may be in a position of additional income in retirement. Examining your retirement savings and having a comprehensive financial plan that outlines shortfalls or if you're on track are the first steps towards knowing if you should work during your retirement. Ask yourself these questions as part of your decision-making process:
- Do you save money to cover unforeseen emergencies?
- Do you follow a monthly budget?
- Is your saving and spending in balance?
- Do you discuss significant financial decisions with others before making them?
- Do you have a financial plan that you monitor and adjust?
- Do you give yourself an annual money checkup?
- Do you work with a financial professional?
How much of your income can you replace in retirement?
Aim to replace 80% of your income in retirement as a starting point for your retirement savings so that you can maintain the same lifestyle you have today. Account for all sources of retirement savings income in your calculation:
- Roth IRA
- Social Security
- Other retirement savings
Consider the impact of working on your monthly Social Security benefit
If you have not saved enough money for retirement, you may be more dependent on your Social Security retirement benefits and need to take them earlier. On the contrary, if you have substantial retirement savings or income from other sources, you may benefit by postponing your initial Social Security benefits starting date.
You can get Social Security retirement benefits and work at the same time. Keep in mind that if you file for Social Security and continue to work before your full retirement age, your earnings will exceed certain limits, and a portion of monthly benefit will be withheld temporarily.
However, if you are younger than full retirement age and make more than the yearly earnings limit, your benefits will be reduced. Starting with the month you reach full retirement age, your benefits will not be reduced no matter how much you earn.
The Social Security Administration uses the following earnings limits to reduce your benefits: (Source: What Happens if I work and get Social Security retirement benefits? SSA.gov)
- If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2023 the limit is $21,240.
- In the year you reach full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above a different limit, but they only count earnings before the month you reach your full retirement age. If you will reach full retirement age in 2023, the limit on your earnings for the months before full retirement age is $56,520.
- Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.
Once you have made your decision, work with a financial professional to help you determine specific retirement income goals, strategies, and actions to pursue them. In deciding if you should work during retirement, a comprehensive financial plan will consider your future expenses, liabilities, and life expectancy. Once you have the information, you can make an informed decision about working in retirement.