Continuing to work past retirement age has become a popular option for many retirees. Most do it for pure love of the job while others do so out of necessity. Funding retirement is expensive so if you haven’t been able to save enough during your early years, continuing to remain active in the workforce is going to be the answer to your financial needs.
However, you need to be aware of the effect that doing part-time work in retirement is going to have on the benefits you expect to receive from Social Security. First of all, it’s crucial that you know what your full retirement age is. If you continue to work before you have reached this full retirement age, your Social Security payouts are going to be smaller for the years that you continue to be active in the workforce.
If you’re under the assumption that 65 years old is the official retirement age, it’s time to brush up on your knowledge. If you were born from January 2, 1943 through January 1, 1955, you will be eligible for retirement insurance benefits when you turn 66 years old. Social Security is very clear on this matter: “If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn.”
Should you opt to start receiving your Social Security payout earlier than what is deemed to be your full retirement age, the law sets limits on how much you can earn and still be able to get your benefits. Click here to to view these thresholds.
It’s also important to understand that the amount withheld from you before you reached full retirement age will not be lost. Social Security will make the necessary adjustments and pay back the amount when you become officially retired.
Another thing that you should be aware of if you intend to work during retirement is the possibility that you could be bumped to a higher tax bracket. One way to put yourself in this position is if you start taking distributions from your retirement plan while getting a salary from your employer.
A little planning will help you avoid this possibility. Make sure that you know just how near you are to the next higher tax bracket shortly before retiring and plan on taking smaller distributions from your retirement plan so that your income does not skyrocket and bring you to the next tax bracket.