Times are tough for a lot of retirees. Inflation has driven living costs higher, and many older Americans are having a hard time paying their bills.
It's therefore not surprising to learn that 33% of current retirees are planning or actively considering a return to work, according to a recent Nationwide survey. While for some people, that decision will relate to social reasons and the desire to have more of a routine, the top reason cited for returning to work in some capacity is the fear of running out of money.
If you're a retiree looking to return to a job in some shape or form, you may find that it not only improves your financial picture, but also helps to add structure and meaning to your days. But if you're collecting Social Security, you'll need to be careful if a return to the workforce is imminent.
Image source: Getty Images.
Know the rules
It's absolutely permissible to earn a paycheck from a job and collect Social Security at the same time. But if you do so before reaching full retirement age (FRA), you'll be subject to an earnings-test limit.
If your wages exceed that limit, you'll risk having some of your Social Security benefits withheld. While you'll be entitled to get that money added back into your benefits once you reach FRA, losing that money temporarily might cause a financial crunch you don't want.
Social Security's earnings-test limits generally change from year to year. In 2024, you're allowed to earn $22,320 without having your benefits negatively impacted at all. From there, you'll have $1 in Social Security withheld per $2 of earnings.
The earnings-test limit is different if you'll be reaching FRA at any point in 2024 but haven't yet reached it. In that case, you can earn up to $59,520 without negatively affecting your Social Security. But if your earnings go beyond that point, you'll have $1 in Social Security withheld per $3 of income.
To be clear, if you're already at your FRA, you don't have to concern yourself with these numbers. You could earn $300,000 a year or more and still collect your full monthly Social Security check.
Return to work strategically
Knowing the Social Security earnings-test limits could help you seek out part-time work strategically. If you don't want benefits withheld, for example, you may want to do the math on the wage you're offered and limit your hours so you're not exceeding $22,320 or $59,520 a year, depending on the threshold that applies to you.
Furthermore, if you're a retiree who's been living off your savings and haven't yet claimed Social Security, you may want to hold off if you intend to return to work -- especially if you haven't yet reached your FRA. Even if you have reached FRA, for each year you delay your Social Security filing beyond that point up until age 70, your monthly benefit will get a permanent 8% boost.
Earning money from a job might enable you to hold off on claiming Social Security a bit longer and set you up with a higher monthly payday for life. If running out of money in retirement is a big fear of yours, a more generous Social Security benefit could help alleviate that concern.
