Things To Consider Before Working During Retirement

Things To Consider Before Working During Retirement

Share This:

You must consider a few things before making your decision to work once you retire. As you get older, the question of when to collect Social Security retirement benefits and how your monthly payment may be impacted by working is essential. Here are three things to consider before making your decision:

#1 – how much of your income will you replace with retirement savings in retirement?

Aim to replace 80% of your income in retirement as a starting point for your retirement savings so that you can maintain the same lifestyle you have today. Account for all sources of retirement savings income in your calculation:

  • 401(k)
  • IRA
  • Roth IRA
  • Annuities
  • Pension
  • Social Security
  • Other retirement savings

Once you have a financial plan with your retirement savings information, you’ll know how much income you can replace in retirement with your savings. A monthly budget can help you determine your monthly expenses and where you can trim them, and how long your retirement savings may last.

#2 – the reason you want to work in retirement

Perhaps you enjoy working and want to continue part time. Or, you may be in a position of additional income in retirement. Examining your retirement savings and having a comprehensive financial plan that outlines shortfalls or if you’re on track are the first steps towards knowing if you should work during your retirement. Ask yourself these questions as part of your decision-making process:

  • Do you save money to cover unforeseen emergencies?
  • Do you follow a monthly budget?
  • Is your saving and spending in balance?
  • Do you discuss significant financial decisions with others before making them?
  • Do you have a financial plan that you monitor and adjust?
  • Do you give yourself an annual money checkup?
  • Do you work with a financial professional?

#3 – the impact of working on your monthly social security benefit

If you have not saved enough money for retirement, you may be more dependent on your Social Security retirement benefits and need to take them earlier. On the contrary, if you have substantial retirement savings or income from other sources, you may benefit by postponing your initial Social Security benefits starting date. 

You can get Social Security retirement benefits and work at the same time. Keep in mind that if you file for Social Security and continue to work before your full retirement age, your earnings will exceed certain limits, and a portion of monthly benefit will be withheld temporarily. 

However, if you are younger than full retirement age and make more than the yearly earnings limit, your benefits will be reduced. Starting with the month you reach full retirement age, your benefits will not be reduced no matter how much you earn.

The Social Security Administration uses the following earnings limits to reduce your benefits:

  • If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2023 the limit is $21,240.
  • In the year you reach full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above a different limit, but they only count earnings before the month you reach your full retirement age. If you will reach full retirement age in 2023, the limit on your earnings for the months before full retirement age is $56,520.
  • Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

Source – What Happens if I Work and Get Social Security Retirement Benefits?

Talk to us today

Once you have made your decision, we can help you determine specific retirement income goals, strategies, and actions to achieve them. In deciding if you should work during retirement, a comprehensive financial plan will consider your future expenses, liabilities, and life expectancy. Once you have the information, you can make an informed decision about working in retirement.

Contact us today!

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.