Are you planning on consulting or working part-time during retirement? If so, you're not alone. Recent studies have consistently shown that a majority of retirees plan to work at least some period of time during their retirement years. Here are some ideas to consider:
Why work during retirement?
Obviously, if you work during retirement, you'll be earning money and relying less on your retirement savings, leaving more to grow for the future. You may also have access to affordable health care, as some employers offer this benefit to part-time employees.
There are also non-economic reasons for working during retirement. Many retirees work for personal fulfillment, to stay mentally and physically active, to enjoy the social benefits, or to satisfy an entrepreneurial desire.
What about my Social Security benefit?
Working may enable you to delay claiming Social Security. In general, the later you begin receiving benefits, the greater your benefit will be. Whether or not delaying Social Security is the right decision for you depends on your personal circumstances.
One of several factors to consider is whether or not you’ll continue working after you start receiving benefits, as your earnings may affect the amount you’ll be paid.
If you've reached full retirement age (66 to 67, depending on when you were born), you can earn as much as you want without affecting your Social Security benefit. But if you haven't yet reached full retirement age, $1 in benefits will be withheld for every $2 you earn over the annual earnings limit ($16,920 in 2017).
A higher earnings limit applies in the year you reach full retirement age. If you earn more than this higher limit ($44,880 in 2017), $1 in benefits will be withheld for every $3 you earn over that amount, until the month you reach full retirement age — then you'll get your full benefit no matter how much you earn.
Not all income reduces your Social Security benefit. In general, Social Security only takes into account wages you've earned as an employee, net earnings from self-employment, and other types of work-related income such as bonuses, commissions, and fees. Private pensions, annuities, IRA payments, and investment income won't reduce your benefit.
Even if some of your benefits are withheld prior to your full retirement age, you'll generally receive a higher monthly benefit starting at your full retirement age, because the Social Security Administration (SSA) will recalculate your benefit and give you credit for amounts that were withheld. If you continue to work, any new earnings may also increase your monthly benefit. The SSA reviews your earnings record every year to see if you had additional earnings that would increase your benefit.
If you’d like to know more about how working during retirement could affect your Retirement Income Plan, please contact a member of the HCM Wealth Advisory Team:
Mike Hengehold ([email protected])
Casey Boland ([email protected])
Jake Butcher ([email protected])
Jim Eutsler ([email protected])
Greg Middendorf ([email protected])
Steve Hengehold ([email protected])