“Unretiring,” or the act of returning to work after retirement, isn’t just for young Bucks like Tom Brady.
The latest data shows that about 3.2 percent of workers who retired a year ago have rejoined the workforce — about 1.7 million people.
This means the number of retirees returning to the workforce is returning to pre-pandemic levels, says spring report from Indeed Hiring Lab.
Yet John Tarnoff, an L.A.-based career reinvention coach, says non-retirement has been an underreported phenomenon for years.
“The cost of living was going up even before the current inflationary cycle that we’re in now — costs were going up, fixed incomes were no longer good for people, Social Security as an institution was under threat,” says Tarnoff.
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What drives retired workers back into the workforce?
Spencer Betts, a certified financial planner and chief compliance officer with Bickling Financial Services in Lexington, Mass., says some retirees may return to work because high vacancies and salary increases.
Older workers may also feel safer now than at the peak of the pandemic, especially if they are fully vaccinated.
Economist at the Federal Reserve of St. Louis Miguel Faria-e-Castro reported over 2.5 million additional retirements due to COVID-19 as of August 2021. Many of these people may return to work now that opportunities are available and money is tight.
“Retirement is a misnomer—there is no more retirement,” says Tarnoff. “I think older workers are going to be caught in a tight spot because they don’t have the total income to keep up with inflation.”
He adds that many older workers may have been pushed out of the workforce during pandemic-related layoffs but did not choose to voluntarily retire.
The median income for households with at least one person age 65 or older was just over $44,000 in 2017, according to the most recent data available from the US Census Bureau. Social Security typically makes up the highest portion of that income at $16,560, followed by earnings at $13,950.
Betts notes that many older workers may still choose part-time work once they do hit retirement age.
“I think the biggest trend — and it’s been going on for many years — is … the slide into retirement where it’s like, ‘I’m not going to work 40 hours, I’m going to work 30, 20, 10 . . .'”
Higher income means higher taxes
A retiree returning to the workforce will not necessarily get the same job and salary range they had before retirement. If you want to come out of a pension, you need to be aware of the potential tax consequences that higher income brings.
Betts gives the example of a retiree with a consulting business, which often means filing a Form 1099, a tax form for individuals who earn money from an individual or entity that is not their employer.
“You might get the same salary. But now you are responsible for both sides of the Social Security tax. So that’s naturally like a 9% cut in your pay.”
Workers who have joined their Social security benefits pay 6.2% on their earnings up to $147,000 — while those who are self-employed face a cut of 12.4%, which can be offset by income tax provisions.
Your age and when you start receiving your benefits can also affect the amount of Social Security you receive. The full retirement age for those born from 1943 to 1954 is 66 and then gradually increases each year until you reach 67 for those born in 1960 or later.
If you’re under full retirement age, you can make up to $19,560 and get all your benefits. “If you make more than that, then for every $2 over that number, you have to pay $1 of your Social Security back,” says Betts.
In the year you reach retirement age, you can make up to $51,960 to receive your full benefits. For every $3 over the limit, $1 will be deducted.
Depending on where you live and how high your state tax rate is, nearly half of your income could go to the taxman, Betts adds. “So make sure you don’t price yourself too low.”
What else should you know when applying for a job?
Betts says if you have the ability to bring in more income, it will usually be a net positive in the long run.
“They probably take less out of their investments, they can save more,” he explains. “Maybe they can put a lot of that toward future retirements, into an IRA or investment account, or to pay down debt faster.”
When applying for a job, Tarnoff says the most important thing is to focus on your value as an employee and consider adding new skills to your repertoire.
“It is vital that older workers get involved and roll up their sleeves along with everyone else. There’s no reason an older worker can’t learn the same telecommuting and technology skills as a younger worker.”
Cleaning up your LinkedIn page and networking is critical. Tarnoff also recommends focusing on the opportunities that best match your skills and experience, rather than randomly applying to hundreds job ads.
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This article provides information only and should not be construed as advice. Provided without any warranty.