“Retiring,” or the act of returning to work after retirement, isn’t just for young Buccs like Tom Brady.
Recent figures show that about 3.2% of workers who retired a year ago have rejoined the workforce — about 1.7 million people.
That means the number of retirees returning to the workforce is back to pre-pandemic levels, says a spring report from the Indeed Hiring Lab.
But John Tarnoff, a Los Angeles-based career reinvention coach, says retirement has been an underreported phenomenon for years.
“The cost of living was going up even before the current inflationary cycle 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.
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 could return to work because of high job vacancies and wage increases.
Older workers may also feel safer now than they did during the peak of the pandemic, especially if they are fully vaccinated.
St. Louis Federal Reserve Bank economist Miguel Faria-e-Castro reported more than 2.5 million excess retirements due to COVID-19 as of August 2021. Many of those people could return to work now that opportunities exist and money is limited.
“Retirement is a misnomer—there’s no such thing as retirement anymore,” says Tarnoff. “I think older workers are going to be squeezed because they don’t have the income overall 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 voluntarily choose to retire.
The median income for households where at least one person is 65 or older was just over $44,000 in 2017, according to the most recent data available from the U.S. Census Bureau. Social Security typically makes up the highest percentage of that income, at $16,560, followed by earnings at $13,950.
Betts notes that many older workers may still choose to work part-time once they reach retirement age.
“I think the biggest trend — and it’s been going on for many years — is … 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 is not necessarily going to get the same range of jobs and wages they had before they retired. If you want to come out of retirement, you need to be aware of the potential tax implications of a higher income.
Betts gives an example of a retiree with a consulting gig, which often means filing a Form 1099 — a tax form for people who earn money from a person or entity other than their employer.
“You can get the same amount of 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 taken their Social Security benefits pay 6.2% on their earnings up to $147,000 — while those who are self-employed face a 12.4% cut that 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 between 1943 and 1954 is 66, and then gradually increases each year until you reach 67 for those born in 1960 or later.
If you are under full retirement age, you can earn up to $19,560 and receive all of your benefits. “If you earn more than that, then for every $2 over that number, you have to pay back $1 from your Social Security,” says Betts.
In the year you reach your retirement age, you can earn up to $51,960 to receive your full benefits. For every $3 over the limit, $1 will be withheld.
Depending on where you live and how high your state income tax rate is, nearly half of your earnings can go to the taxpayer, Betts adds. “So make sure you don’t price yourself too low.”
What else should you know when applying for jobs?
Betts says that if you have the ability to bring in more revenue, it’s usually a net positive in the long run.
“They probably get less from their investments, they can save more,” he explains. “Maybe they can put a lot of it toward future retirement, an IRA or investment account, or paying off 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 as well.
“It is vital that older workers dive in and roll up their sleeves along with everyone else. There’s no reason why an older worker can’t learn the same remote work skills and technology skills as a younger worker.”
Cleaning up your LinkedIn page and networking is vital. Tarnoff also recommends zeroing in on the opportunities that best match your skills and experience, rather than randomly applying to hundreds of job postings.
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This article provides information only and should not be construed as advice. Provided without warranty of any kind.