Why More Retirees Are Going Back to Work

“My own family immigrated to the U.S. when I was 7,” Hurtado says. “I know how owning a home can bring a sense of stability, and I also want to take some of the lessons I’ve learned over the years to help other families.”

Hurtado isn’t alone in his desire to remain in the workforce. Ward says T. Rowe Price’s latest annual “Retirement Savings and Spending Study” found that about 20 percent of retirees are working either part- or full-time.

“The reasons retirees return to work vary along gender and marital lines,” Ward says. “Our study found women and single retirees are more likely to cite income as the primary motivator for working into retirement, while men were more likely to cite social connections as a motivator to return to work.”

Yet before retirees decide to unretire, experts say they should consider the financial implications:

• Think about how working will affect Social Security, Medicare and pension benefits. For retirees who are receiving Social Security benefits prior to their full retirement age (up to 67 years old, depending on birth year), going back to work and earning more than a certain amount ($21,240 in 2023) can lead to penalty deductions from their Social Security payments.

“If a retiree has been taking Social Security for less than 12 months, they may have the option to withdraw their claim and pay back what they have received so far,” says Wes Moss, a certified financial planner, investment adviser and managing partner of Capital Investment Advisors in Atlanta. “This could allow their monthly benefits to begin increasing again, potentially leading to higher monthly Social Security benefits starting at a later date.”

In addition, Moss says choosing to unretire can increase an individual’s annual income, which in turn could increase their premiums for Medicare parts B and D.

“Unretiring should have little impact on a pension amount,” Moss says. “However, if an individual’s income rises now that they have unretired, their overall tax bracket could end up being higher, and their take-home [after-tax] dollars from a pension check could be diminished.”

• Strengthen your retirement plan. On the plus side, Ward says unretiring can be a good way to save more money for retirement, while also delaying retirement account withdrawals and collecting Social Security benefits.

Ward notes that unretiring allows individuals who are 50 or older to make higher catch-up contributions to their 401(k) and individual retirement accounts (IRAs). For 2023, eligible workers can save another $7,500 after maxing out employee deferrals at $22,500.

Plan for additional expenses. According to Ward, those retirees who choose to go back to work can use the additional time to plan for fluctuating retirement expenses.

“While spending generally decreases in retirement, many retirees experience meaningful ups and downs in their spending over time,” she says. “Home-related expenses, health-related costs and transportation can all be expenses that aren’t anticipated and pose a financial challenge.”

On the positive side, Moss says income made after a return to the workplace can provide a retirement savings cushion.

“Unretiring can result in ‘bonus money’ retirees didn’t necessarily plan on having,” he says. “I often see these extra cushion funds go towards experiential spending, like a [two-week] Scandinavian cruise, a long wine tour trip to Italy or a heritage tour of Israel.”