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Returning to Work After Retirement Can Impact Benefits

For some, the golden years of retirement are different than they may have expected. Many seniors find themselves returning to work. Whether the reason for rejoining the workforce is personally or financially motivated, it’s important to understand how it will affect retirement income benefits.

Kiplinger’s Retirement Report provides some useful information on how returning to work after retirement could affect your Social Security benefits and retirement funds. 

Social Security

  • If you’ve already begun claiming Social Security, but are younger than 66, some of the income you begin earning at your new job may be withheld.
  • Once you pass retirement age, the limit disappears and any income you earn will not impact your Social Security benefits.
  • If you do fall under one of the annual earning limits, the money withheld will be returned to you via increased benefits when you reach full retirement age.
  • Don’t forget to notify the Social Security office that you’ve returned to work. You could end up having to pay back a portion of your benefits in a lump sum or future benefits may be reduced.
  • If you would prefer to stop Social Security benefits once you begin working again, you can withdraw your application for benefits if you’re within 12 months of your initial application. If more than 12 months have passed, you can opt to put your benefits on hold until you reach age 70.

Retirement Funds

  • One attractive benefit of returning to work after retirement is that you can bulk up your nest egg. After age 50, you are allowed to contribute $6,500 per year to a traditional IRA. After age 70 ½, you can no longer contribute to a traditional IRA, however, you can put money in a Roth IRA. You’re also allowed to make contributions to any 401K plans offered through your employer.
  • If you opt to become your own boss and start a business after retirement, you have the option to open a SEP IRA or a personal 401K account.
  • Any pension payments you’re receiving from a former employer, will continue even if you return to work. The exception to this rule is if you return to your previous employer. In that case, the employer will no longer consider you retired and will put your pension payments on hold.

Still have questions? To help you get the most out of your golden years, Capitol Federal® offers a variety of resources on our Web site to aid you in your planning.  Additional information can also be found on these sites:

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Categories: Savings Strategies, Retirement
Tags: Retirement Tips


Jennifer S

Nice article.

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