Smart Management of Retirement Income—Working in Retirement
Understand the Impact on Retirement Benefits
Whether working after retirement is financially necessary or personally rewarding, you should know that earning income during this stage of your life might affect your retirement benefits. Before you accept that first post-retirement paycheck, make sure you understand exactly how working could alter your Social Security, pension benefits and other retirement income.
Social Security and Limits on Earned Income
If you've already started withdrawing Social Security benefits, you might lose some of that income, depending on how much you earn and how old you are. That's because before you reach your full retirement age, there are caps on what you can earn before you begin to lose Social Security income. So if you think you will return to work after retirement, you might consider waiting to start your benefits. In fact, there may be an advantage to postponing Social Security if you don't need the income to live on. That's because your base benefit gradually increases until you reach 70. There's no advantage to postponing benefits after that age, however, since your base benefit doesn't get any bigger even if you continue to pay into the system because you're still earning income.
Alternatively, if you decide to return to work after you start taking Social Security benefits, you may have some options. For example, if you retire and start collecting benefits at age 62, but you're then offered a job that's too good to turn down, you can stop your Social Security payments using a document known as a withdrawal of application. As long as you repay any benefits you already received, you can start taking them again later on with a clean slate when you're ready to quit working for good. Whatever you earned in the period in which you returned to work can increase the amount you're eligible to receive later on. If you have questions about how to handle this application, you can call the Social Security Administration at (800) 772-1213.
If you work after you reach your full retirement age (FRA), there are no limits or penalties on your Social Security benefits, no matter how much you earn. And regardless of your age, the income caps apply only to earned income, not to income from your pensions, annuities, investments or other government benefits.