Working After Retirement: 3 Benefits & 3 Cons You Should Really Consider

By Chika


Last Updated: September 11, 2023


Does working after retirement seem anti-climactic? 

It's natural to imagine that when it's time to retire, seniors would happily quit their profession to pursue more leisurely pursuits, but an increasing number of Americans are choosing to work throughout their golden years.

Nearly half of American seniors anticipate working part-time or picking up a side job after retirement, according to the American Advisors Group.

You might be wondering what the advantages and disadvantages are.

The benefits and drawbacks of working after retirement will be discussed in this article.



Is Working After Retirement Possible?

Of course, it is very possible to work after retirement, and there are people already doing this.

According to the Administration for Community Living, around 20% of Americans 65 and older are working or looking for a job. While some are still working full-time, many others have changed careers or reduced their working hours after leaving a long-term position.

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3 Benefits of Working After Retirement

1. Extra Income

Because they don't have enough money to support their living needs in retirement, retirees may begin looking for new employment. This might happen if a retiree didn't save enough for retirement, if their cost of living rises, or if they have a financial or medical emergency.

The great majority of Baby Boomers are unprepared for retirement, with 45 percent having no savings at all. (The Insured Retirement Institute)

Working during retirement is a means for many people to relieve some of the financial burden of living on a budget, especially in locations where the cost of living is high.

Jobs after retirement, on the other hand, might give extra "fun money" that allows retirees to check off some of those bucket list items, such as a family vacation.

Furthermore, if a retiree continues to work in a typical job after retirement, they will continue to pay into Social Security. This could potentially increase the value of their eventual payments.

They may also be able to delay taking advantage of their retirement benefit until they reach full retirement age or later, increasing their value.


2. Eases Boredom

Working after retirement enables retirees the opportunity to battle boredom by taking on tasks. Many individuals look forward to retirement. Others may be surprised when they find themselves with tons of free time and nothing productive to do. 

Retirees may be accustomed to working in a stimulating environment. When a retiree is unexpectedly faced with lengthy days with no plans, a shift in habit might lead to lethargy and boredom. 

Returning to work after retirement might assist to alleviate boredom. Some retirees may opt to:

  • pursue an old passion
  • take on a new profession to develop new skills
  • or even work in a charity or giving back capacity

Working part-time in retirement may provide a retiree with the thrill of a career while also allowing them greater flexibility in their schedule.


3. Helps Foster New Social Connections

Working in retirement may assist a retiree to live a more sociable life.

This is in addition to providing structure to each day and preventing boredom. One unintended consequence of retiring may be the realization that many of your friends are also coworkers.

Making new contacts after retirement may be difficult. Getting a job after retirement, even if it's only part-time, might help you make new social ties.



3 Downsides to Working After Retirement

1. May impact social security benefits

First and foremost, you should be aware that working during retirement may have an influence on your retirement benefits. Income from post-retirement work, for example, may alter Medicare eligibility and Social Security benefits.


2. May change taxes

Working in retirement may alter your tax liability in addition to changing your benefits. If a retiree's total income exceeds a specific threshold, Social Security payments may be taxed. This includes taxable and nontaxable income, as well as up to 85% of Social Security payments.

Assume a retiree files their taxes alone and has a combined income of between $25,000 and $34,000. (Adjusted gross income + nontaxable interest and up to half of their Social Security payment). They might be taxed on up to 50% of their Social Security income in that instance.

Of course, people who take employment after retirement must pay regular state and federal income taxes on the money they make in their new occupations. They will also be responsible for Social Security and Medicare contributions.


3. Less free time

The freedom to create your own schedule is one of the most enticing aspects of retirement.

You may choose to have none at all! Depending on the sort of retirement employment you perform, you may have to give up some of your independence to fulfill the demands of even a part-time job.



Planning for Retirement

Beginning to plan for your retirement early will help you achieve your retirement objectives.

This applies whether or not you want to work after retirement. Proactive preparation can allow you to decide whether or not to work in retirement based on your preferences, rather than your financial needs.

Retirement planning does not have to be unpleasant. Using an online retirement calculator to help you narrow down precise figures to strive for is a wonderful place to start. Once you have your number, you must determine which form of retirement account you will use to save.


Investing in an employer-sponsored 401(k)

Investing in a 401(k), an employer-sponsored retirement plan that may assist in minimizing the amount of money saved that is taxed. This is one of the most popular and tax-efficient methods to save for retirement.


Opening an IRA

An online IRA, which is a separate sort of retirement account, is also available to employees. Workers can save up to $6,000 each year before taxes in this account ($7,000 for those 50 and over).

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Working After Retirement is Definitely Possible!

Working in retirement is possible–and in many cases desirable. But good retirement planning may make employment a choice rather than a financial necessity.

Calculating how much money you'll need for retirement and picking the correct sort of account to put it in are both part of retirement planning.

A 401(k) plan via your employer is a good place to start. You can establish an IRA or an investing account with a broker if you don't have access to a corporate retirement plan (or if it's already maxed out).

Editor's note: This article was originally published May 13, 2022 and has been updated to improve reader experience.

Photo by RODNAE Productions


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