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Working in Retirement

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 after retirement may impact 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 if you continue working post-retirement, 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, 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.

Pensions and Other Retirement Plans

If you have a pension, the pension benefits you receive might be affected if you go back to work after retirement—but that depends on your individual pension plan. You can, however, still contribute to an employer-sponsored plan—such as a 401(k) or a 403(b) and, in this case, your age gives you an advantage. If you’re over 50, you may make annual tax-deferred catch-up contributions to a salary deduction plan in addition to the regular maximum contribution. Similarly, you can also make catch-up contributions to IRAs.

Once you’re retired but still working, you can continue contributing to a traditional or Roth IRA as long as you have earned income to put into it.

Jobs and Required Minimum Distributions

Working in retirement might change many things in your life, but earned income doesn’t get you off the hook for required minimum distributions (RMD), commonly known as your required withdrawal, from your tax-deferred retirement accounts.

  • Traditional IRAs and qualified pension annuities. If you turned 72 years old in 2022, you generally must begin withdrawing money by April 1, 2023. For calendar year 2023, the RMD age increases to 73 for people who turn 72 years old on or after January 1, 2023, and 73 years old on or before December 31, 2032. Additional changes will go into effect in 2033.
  • 401(k)s and other employer-sponsored retirement plans. If you continue to work after you reach RMD age and you participate in your company’s retirement plan, you might be able to delay your required withdrawals from that account until April 1 of the year following the year you retire. Check with your plan administrator to see whether this is the case.
  • Roth options in employer-sponsored retirement plans. Starting in 2024, any Roth account that is part of an employer-sponsored plan, such as a Roth 401(k), will be exempt from the RMD rules as long as the participant is still living.

Use FINRA’s RMD calculator to determine how much you are required to withdraw.