Working During Retirement: Creating a Sense of Purpose and Making Money at the Same Time
Retirement—how we look forward to it! But when the time comes and the initial candy rush of liberty has worn off, it is not unusual for people to realize that they need something to fill their time, and a bit of extra cash to live on. You may find that you are one of the retirees who is thinking of getting some work to fill your hours—and your purse.
What Sort of Work?
The basic choice for a retiree remains that of any working person: to work for an employer or to work for yourself?
Taking a full or part time job provides a ready-made structure to your day and a regular income. You may still be able to join the employer’s pension plan.
Being self-employed gives you more freedom, but is less financially secure and demands more discipline. Also, you may find that you need credit to get going, but not have a great credit rating. In this case, it would be worth checking one of the resources on Credit Repair Simplified. You will have to maintain adequate records for your tax returns.
In either case, if you are drawing a pension, you could push your earnings into a higher tax bracket.
Social Security
If you have reached normal retirement age (66 or 67 for people born after 1943), then your Social Security benefits are not affected by any work you take on. If you draw benefits before NRA, your benefits will be reduced by half of everything you earn over an annual limit. These deductions should be returned to you in the form of higher benefits later.
Your Social Security benefits may become taxable if your modified adjusted gross income exceeds a threshold.
If you have been drawing Social Security for less than a year you have the option of paying it back and then receiving a higher level later.
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Pension
You should be able to contribute to an employer’s qualified retirement plan at any age, but if you are going to return to your former employer and are already drawing an income from that plan, you will need to discuss with them whether you can continue to contribute.
If you contribute to an individual retirement arrangement (IRA) you can continue to do so. If you have a traditional IRA you can contribute up to the year you are 70½, when you must start to draw benefits. If yours is a Roth IRA, you can contribute for as long as you like and draw the benefits when you choose.
Not Just About Money
Working in retirement is not just about earning money—it is also about having a structure to your day and a sense of purpose for your time. However, money is an important part of the decision, and you need to be careful abut the decisions you take now, some of which will stay with you for a long time.
Georgina Taylor is a personal finance consultant who works purely with those approaching retirement age. Her online articles are informative on what needs to be done to retire right.
