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Working for Extra Income
Just because you're retired doesn't mean you're not working.
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 Although the traditional retirement age is 65, many
people retire earlier - often in their early 60s. And many other people go on working into their 70s or
longer. In some cases, you can collect a pension from one job while working
full-time at another. Or you can work part-time for the same company from
which you've retired. Check first, though. Sometimes there are restrictions
on what's known as double-dipping, or collecting a salary and a pension
from the same employer.
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DEALING WITH SOCIAL SECURITY
If you're working and collecting benefits, you must estimate your earnings for the Social
Security Administration (SSA), using a form called an Annual Report of Earnings. If you expect to
earn more than the limit for any year, the SSA reduces the number of checks you receive based on
your estimate.
If it turns out that you earn less than you estimated, then the SSA will issue a check to make up
what you're owed. If you earn more than you estimated, you'll have to repay the SSA the excess
benefits, either in installments or a lump sum. In either case, you submit form SSA-777 and a
copy of your tax form to the SSA to verify your earnings.
Trying to keep the SSA in the dark is a bad idea. If you don't report that
you're working, you'll have to pay a penalty as well as return any overpayment
of benefits you do receive.
STARTING AGAIN
You can change your mind about the right time to begin collecting Social Security, or you can
suspend your benefits after you've started collecting. That means whether you want to go back
to work or feel you have to, you won't get bogged down with paperwork trying to estimate your
potential earnings.
For example, if you retire at 62 and
go back to work at 63, you can end your benefits, repay what you've received,
and postpone collecting until the next time you retire. Since you'll be
contributing again, you're likely to increase the base amount on which the
new benefit is figured.
SPENDING VERSUS INVESTING
One of the major decisions you'll face if you work
after you retire is what to do with your earnings. If you can live on investment
income or a pension from your previous job, you can invest some of your
current earnings in a retirement program, such as an individual
retirement arrangement (IRA) or a salary
reduction plan. That allows
a portion of your post-retirement earnings to accumulate tax-deferred so
in the future you'll have more assets to convert to income.
When you do stop working for good, or if you need the money in an emergency
and are older than 59 1/2, you have the added advantage of being able to
withdraw IRA money for any purpose without owing a penalty.
WORKING PART-TIME You may be thinking about working after retirement because you need more money to live on, or
because you'd like extra cash to spend on things you enjoy. Working part-time could mean you'd
continue to be eligible for your full Social Security benefits.
For example, if you were between ages 62 and 64 and earned $200 a week,
you'd still be eligible for your full Social Security benefit. But the extra
$800 a month could make the difference between feeling secure and being
forced to cut back on necessities, or between being able to take a cross-country
trip and having to stay home.
Many employers like part-time workers because they don't have to provide
health insurance, retirement plans, and other benefits. If you've got retirement
health benefits, for example, or qualify for Medicare, you don't need coverage
at your post-retirement job. You may also find part-time positions that
are open to people who can work during school hours, when young people are
in class.
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© 2008 by Lightbulb Press,
Inc.
All Rights Reserved.
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