Retirement can bring lots of good things: time off to spend with family, the freedom to travel, or the ability to try something new after so many years of hard work. However, many retirees find that their retirement income won’t sustain them in the lifestyle they are accustomed to, which can lead to stress at a time of life when things should be easier. You can take some steps toward peace of mind after you are retired by continuing to build up your savings, and perhaps by taking on a new job or a part-time gig. Just keep in mind that any additional income you earn while receiving Social Security retirement benefits could affect the amount of benefits you receive, so it’s essential to be well-versed in the rules of the game.
Long before you make your decision to apply for Social Security benefits, consult the Social Security website (www.ssa.gov), which contains a wealth of detailed information on working during your retirement years.
Here are just a few factors to consider:
According to the Social Security Administration, you can start receiving Social Security retirement benefits as soon as you reach the age of 62. However, if you start benefits before your “full retirement age,” your benefits are reduced by a fraction of a percent for each month before that full retirement age.1 Since the Social Security “full retirement” age differs—it may be anywhere from 62 to 67, depending on the year you were born—it’s important to figure out how to calculate full retirement. For instance, if you were born after 1959, you won’t be eligible for full retirement benefits until age 67. If you choose to retire before then, your benefits will be reduced, meaning you may have to think about another source of income.
The good news is, it’s easier than ever to find a job that will accommodate your needs. Whether you require something that allows you to work from home, or you prefer something that will help you stay social and active, there’s plenty to choose from. Freelance jobs, driving for a ride-sharing service, greeting or serving as a tour guide at a museum, and retail sales are some of the more popular options, but if your career gave you specific skills, you may be able to translate those same skills into a post-retirement position.
Accounting, teaching, or more creative jobs—such as woodworking or gardening—can all be great ways for seniors to earn extra money. You might look around your town for classes that help seniors learn more about utilizing the internet for job opportunities, or sign up for alerts from job sites that will help you find prospects.
Working during your retirement can bring some financial relief, and if you are full retirement age or older, you may keep all your Social Security benefits, no matter how much you earn. However, if you have not reached full retirement age, the government imposes penalties on your Social Security income if you earn above a certain amount in a given year. For 2021, that amount is capped at $18,960; anything over that will reduce your Social Security benefits by about half. However, the reduced amount will be taken into account once you reach full retirement age, and Social Security will then re-calculate your benefits.2
It’s important to note that these rules may not apply to those who receive survivor’s benefits from Social Security, so it’s imperative to find out what rules apply to your situation. Also, remember that when you work during retirement, you still need to pay Social Security taxes on your earned income, even if you’re already receiving benefits.
Another factor to consider is your tax situation. Depending on how you file and how much income you brought in during the previous year, up to 85 percent of your Social Security benefits could be taxable, because of how Social Security calculates your combined income. Speak to a financial advisor or accountant who is familiar with Social Security and federal tax laws so you’ll have some guidance at tax time.
It’s a wise idea to consult a financial professional before deciding to work after you’ve retired, to get the “big picture” of how employment earnings will affect your Social Security benefits and taxes. Once you know that, you’ll be better prepared to get back into the working world.
1. https://www.ssa.gov/planners/retire/agereduction.html
2. https://www.ssa.gov/pubs/EN-05-10069.pdf
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank. Nevada State Bank is a division of Zions Bancorporation, N.A. Member FDIC