While your household income may get a boost, working in retirement could affect other sources of income, like Social Security or even your taxes. According to the financial planning website SmartAsset, here are the rules for working while receiving benefits:
- If you're under your full retirement age for the entire year, $1 is deducted from your benefit payments for every $2 you earn above the annual limit. (The limit for 2019 is $17,640.)
- In the year you reach full retirement age, $1 in benefits is deducted for every $3 you earn above a different limit for each month before reaching full retirement age. (For 2019, the limit is $46,920.) That money will be added back to your checks when you reach full retirement age, but your total payment will be lower. The Social Security Administration will recalculate your benefit amount to exclude the months when your benefits were reduced or withheld because your earnings from work were more than the allowed limit.
For each year you delay your benefits beyond your normal retirement age, up to age 70, your benefit amount increases. If you’re able to wait until age 70, you’d receive 132% of your benefit amount.
Another factor to consider is that for a traditional 401(k) or IRA, you have to start taking the minimum distribution amount when you hit 70.
If you’re wondering if your employer can cancel your health insurance when you turn 65, the answer is yes, but only if you work at a company with fewer than 20 employees.
As for how working in retirement will affect your taxes, if you’re working and receiving Social Security benefits or have a pension, some of your benefits might be taxed. Since Social Security is based on combined income, if that adjusted gross income is more than $25,000 for single filers and $32,00 for joint, up to 50% of your Social Security benefits could become taxable income, according to NerdWallet.
Need more information on whether you should work in retirement? Check out NerdWallet’s retirement calculator.