Un-retiring? What to Consider Before Returning to the Workforce

1. StanCorpJournal
StanCorp Investment Advisers
April 2010
Un-retiring?
What to Consider Erin Eddins, CFP , ChFC
® ®
erin.eddins@standard.com
Before Returning to the Workforce 425.212.5986
When you were working full-time, retirement may age has gradually increased until it reached 67 for impact on your pension eligibility. Pension plans
have been the ultimate goal—what you were people born after 1959. vary greatly, so it’s important to look into the
working for, saving for and looking forward to. details of yours and consult with your human
You’ll only see a reduction in benefits if you
Today, many retirees are returning to work, some resources representative before returning to work.
exceed the Social Security earnings limit. Here’s
to counter the negative impact the economy has
how it could impact you if you return to work:
had on their retirement savings and others to Retirement Savings
stave off unexpected boredom. • Before your full retirement age: You will lose $1 in Continuing to invest in your retirement accounts
benefits for every $2 you earn above $14,160. and continuing to build up your retirement fund
No matter why you’re returning to work after
• In the year of your full retirement age: You will can be a great benefit of returning to work. You
you’ve retired, consider the impact on your
lose $1 in benefits for every $3 you earn above can contribute to a traditional IRA until age 70½ if
financial situation, as there may be consequences
$37,680 during the months before you reach you have earned income, so returning to work can
that you didn’t anticipate.
full retirement age. give you an opportunity to increase the amount
Health Care in your IRA fund. The tax deductibility of those
• Once you hit your full retirement age: There contributions will depend on your income. There
Health care costs can be a large part of your
is no reduction in benefits, regardless of your are no age restrictions for contributions to Roth
retirement budget, especially if you’re not covered
earnings, beginning with the month you reach IRAs, but the contributions are not tax-deductible.
by retiree health insurance from a prior employer
full retirement age. In addition, you can contribute to your new
or Medicare. Returning to work may make you
eligible for coverage through an employer’s health employer’s retirement plan.
Note that these reduced benefit amounts don’t
plan, reducing your out-of-pocket costs and leaving really mean you are losing any money: you will If you are returning to work for your former
more money in your budget for other things. get it back in the form of a higher benefit amount employer, you may also be able to delay required
If you’re currently receiving retiree health insurance once you reach full retirement age. In fact, some minimum distributions from that employer’s 401(k)
benefits from a former employer, be careful about un-retirees opt to pay back Social Security earnings plan beyond age 70½. This can give your
switching to a new employer’s plan. Retiree health they have already received in order to restart their retirement savings more time to grow tax-deferred.
coverage is valuable, so it’s essential that you benefit payouts at a later date—at an older age
and a higher rate. This may make sense if you A Plan for Your Un-Retirement
closely review plan details before giving it up.
have the cash to pay back the benefits you’ve You planned for your retirement. Make sure you
If you are currently covered by Medicare, you plan for your un-retirement. Consider your options
received and are in a position to wait a little longer
should check with any new employer’s human and weigh the pros and cons carefully. Review
before you begin collecting benefits.
resources department to find out how their health the details of pension, health care, and savings
care coverage works in conjunction with Medicare. Another consideration when it comes to your plans to see how a return to work will affect your
Social Security benefits is taxation. Your benefits eligibility and benefits. Your financial advisor can
Reentering the work force may offer other health
may be taxable, depending on your modified help you determine the best course of action and
care benefits, such as dental and vision insurance
adjusted gross income (MAGI). adjust your investment and retirement plan to
or a flexible health care spending account that
may not be otherwise available to retirees. Find out more about how going back to work account for this and other life changes.
could affect your Social Security benefits at http://
Social Security www.ssa.gov/pubs/10069.html
®
If you are receiving Social Security benefits, Erin Eddins is a Chartered Financial Consultant , a member of
going back to work before you reach your full Pension the Financial Planning Association (FPA) and is a CERTIFIED
You worked hard to earn your pension, but FINANCIAL PLANNER™ professional. She has more than 20
retirement age will reduce your benefit amount.
years of experience working with individuals and families to
Full retirement age had been 65 for many years. returning to work after retirement—especially
develop financial plans and implement investment portfolios
However, for people born in 1938 or later, that for the same employer—could have a negative
to help clients secure their financial futures. She can be
reached at erin.eddins@standard.com or 425.212.5986.
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2010, StanCorp Investment Advisers. All rights reserved