1 in 6 retirees are mulling a return to work. What to consider before ‘unretiring’

For some retirees, heading back to work has emerged as an aspiration.

Roughly 1 in 6 retired Americans say they are mulling over whether to get a job, according to a recent study from Paychex. On average, those “unretiring” individuals have been out of the workforce for four years.

The top reasons cited by people surveyed for the report were “personal reasons” (57%), “needing more money” (53%) and “getting bored” (52%). “Feeling lonely” (45%) and “inflation” (45%) rounded out the top five reasons for considering employment.

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Over time, the number of older adults in the workforce has been growing. Among adults ages 65 to 74, the workforce participation rate was 25.8% in 2021, according to the U.S. Bureau of Labor Statistics. That share is expected to grow to 30.7% by 2031. In the 75-and-older crowd, the portion in the workforce is expected to reach 11.1%, up from 8.6% in 2021.

If you find yourself among the retirees thinking about “unretirement,” there are some things to consider before you return to work.

“I think it really boils down to this: What is the purpose of this job? To earn money because you need it or just to give you something to do?” said Nicholas Bunio, a certified financial planner with Retirement Wealth Advisors in Downingtown, Pennsylvania.

If your reasons for considering work are nonfinancial, you’re not alone.

“Boredom is a huge problem,” said CFP David Mendels, director of planning at Creative Financial Concepts in New York.

“So many people underestimate that,” Mendels said. “Even if you hate your job, it’s a big part of who and what you are.”

“And when you take that away, it’s a huge problem for a lot of people.”

If you’re seeking work for fulfillment, it’s worth considering a job that is low-stress and provides some flexibility, Bunio said. 

“That’s important,” he said. “You’re retired. You’re not building a career.”

Whether you need the income or not, it’s also important to know the impact it can have on other parts of your financial picture.

For example, if you tapped Social Security early and are not yet at your full retirement age as defined by the government, wage income could temporarily reduce your benefits — at least until you reach that age, which is either 66 or 67, depending on your birth year. 

While delaying Social Security for as long as possible means a higher monthly check, many people take it as soon as they can — at age 62 — or soon thereafter.

If you do start getting those monthly checks early, there’s a limit on how much you can earn from working without your benefits being affected. For 2023, that cap is $21,240. For every $2 over the limit, $1 is withheld from benefits.

Then, when you reach full retirement age, the money comes back to you in the form of a permanently higher monthly check. 

“They give it back to you, and that’s a good thing,” Mendels said.

At that point, you also can earn as much as you want from working without it affecting your Social Security benefits.

Also, if you are one of those early takers who is working and you reach full retirement age during 2023, then $1 gets deducted from your benefits for every $3 you earn above $56,520 until the month you reach full retirement age.

In addition to extra income from a job potentially pushing you into a higher tax bracket, it also could trigger additional costs for Medicare.

Basically, higher earners pay a premium surcharge for Medicare Part B (outpatient coverage) and Part D (prescription drug coverage). The extra charges start at income above $97,000 for individuals and $194,000 for married couples who file joint returns.

Of course, if you get health insurance through your new job as a retiree, you may be able to drop Medicare if it makes sense to do so, depending on the specifics of your situation. While workers at companies with fewer than 20 employees generally must be on Medicare once they reach age 65 to avoid paying extra later, people at larger companies may have choices.

That is, you might be able to pick up the company health plan and drop Medicare — and then re-enroll again down the road. If you go this route, however, there are many rules and deadlines to be aware of.