Ever thought about rejoining the workforce for meaningful engagement and financial gains? Discover how un-retirement can reshape your post-retirement life.
The Rise of Un-Retirement
In 2023, over 13% of retired baby boomers entered the workforce again, marking an interesting trend that highlights a shift in retirement perspectives. Contrary to the long-held notion of retirement as a permanent state, many individuals are finding new purpose or financial necessity in rejoining the labor force. Reasons for un-retirement vary, from needing extra income for living expenses to a yearning for the social interaction that work provides.
Financial Benefits of Returning to Work
Returning to work as a retired individual can offer substantial financial benefits
- Improved Cash Flow: Increased earnings can provide the financial relief you need to pursue hobbies, travel, or simply enjoy a more comfortable lifestyle.
- Debt Reduction: With added income, it becomes easier to manage and lessen your debt burden, freeing up more resources for savings or leisure activities.
- Contributing to Tax-Advantaged Accounts: This income can be directed towards a 529 education savings plan for your grandchildren, or even an employer-sponsored retirement plan, enhancing your long-term financial health.
Additionally, being back at work means you could access employer benefits, such as health insurance through an employer-sponsored group medical plan, which could be a financial win if you're not yet enrolled in Medicare. Furthermore, with earned income, you can contribute to a 401(k) or an IRA, potentially enriching your retirement pool.
Impact on Retirement Accounts
One of the key advantages of un-retirement is the ability to limit withdrawals from your existing 401(k) and IRA accounts. By generating income, you might need to withdraw less, allowing these investments to grow; therefore, keeping your future prospects brighter. As per the regulations, you’re required to start making withdrawals from traditional IRAs and 401(k)s at age 73, or 75 if born in 1960 or later. However, by strategically un-retiring, you’re enhancing your ability to grow your savings without immediate depletion.
The Social Security Puzzle
A crucial aspect to consider when returning to work involves Social Security benefits reduction. If you’ve been taking Social Security and begin working again, be mindful of how this could impact your benefits
- If you're below full retirement age (around 66 to 67), every dollar earned over $23,400 reduces your benefits by $1 for every $2 earned.
- In the year you reach full retirement age, benefits will drop by $1 for every $3 above $62,160.
- Enhance your earnings post-full retirement age without affecting your benefits.
Medicare Premium Concerns
Another factor to contemplate involves the influence of income on your Medicare premiums. Higher earnings from rejoining the workforce may lead to rising premiums based on your income, and in some cases, could shift you into a higher tax bracket. This warrants careful financial planning to minimize unexpected costs related to your employment income.
Are You Ready for Un-Retirement?
Exploring the merits and drawbacks of returning to work is vital. Assessing your personal reasons and readiness will help you make an informed decision
- Evaluate the emotional and financial aspects of reentering the workforce to ensure the benefits outweigh the potential drawbacks.
- Consider the gap in skills or technology that might require updating to land a job.
- Rethink how feasible it is to manage the transitions of both a work-life and a retired life.
If the scales tip in favor of returning, embracing your second act can be a rewarding venture filled with fresh opportunities—both socially and financially. Reinventing oneself after a career is not just about money; it can also encompass newfound purpose and joy. Explore local job opportunities, network with others who have taken similar steps, and begin considering what kind of work would bring you fulfillment.
This journey into un-retirement may just redefine your sense of purpose while securing your financial future. Interested in financial advice for navigating your return to the workforce? Consult your local financial professional for personalized strategies tailored to your circumstances.
This article was crafted with insights from Edward Jones for local Financial Advisor Cody Hougom, CFP®, ChFC®, reachable at 608-781-5427 or via cody.hougom@edwardjones.com. Visit www.edwardjones.com for further information.