Working in Retirement

This Is Not Your Grandparents' Retirement

Modern retirees may have a new concept of retirement than what we've been used to. They tend to be more socially and physically active than ever before. The images of grandma and grandpa rocking back and forth on a chair, knitting, playing bingo or stepping out for the early-bird special have been replaced with active retirees who golf, travel and surf the internet. Many people of retirement age are choosing to stay in the workforce longer, while those who decide to retire may use it as an opportunity to launch a new career or to fulfill a lifelong dream. Before you decide whether or not to retire or rejoin the workforce, consider how working during retirement may affect your finances.

Advantages:

Social Security Benefits

Working past the age of retirement can allow you to increase your monthly Social Security benefits. Because your Social Security payments are based on your top 35 years of income, the longer you stay in the workforce, the more money you may receive when you retire.

More Savings

Postponing retirement may also prevent you from having to dip into your nest egg and retirement savings account. This way, you'll have more money to do what you want when you do retire.

Social Boost

Working during retirement can keep you socially active and mentally stimulated. Many retirees find themselves bored from all of the leisure time on their hands, especially if their friends and colleagues are still at work and can't enjoy the fun with them.

Health Insurance

Working during retirement could also mean health care coverage. However, some jobs require you to work a certain number of hours before offering heath benefits. Be sure to ask your employer.

Disadvantages:

Tough Competition:

The job market is extremely competitive. Some employers are less likely to hire someone who they feel will not be staying on the job for long. They may not want to invest the time and money into training someone who may be leaving in a few years. If you are returning to work, be sure that your skills are up-to-date. You may want to consider taking some classes to learn about the latest software or computer programs.

Pension:

Your pension plan may be adversely affected if you decide to work after retirement. You may have to pay penalties or fees on your pension fund once you start working again. You may want to choose a lump-sum pension payment when you retire, to avoid these issues.

Taxes:

Working during retirement can increase your income, but also increase the percentage (up to 85 percent) of your Social Security benefits that will be seen as taxable income.

IRAs and 401(k)s:

Once you turn 70, you will have to start making minimum withdrawals from your IRA and other qualified retirement plans such as your 401(k), 403(b) and Simplified Employer Plan (SEP), which in turn can subject more of your Social Security benefits to income tax. There are many things to consider before you make such a big decision. You might want to consult with a certified financial planner who can advise you on the best way to increase your income and what pitfalls to avoid in order to protect your assets. Remember, retirement is not the end of your career but the beginning of a new era in your life. The possibilities are endless..

SunTrust is unable to offer tax or legal advice. Please consult with your tax and legal advisors.