Working After Retirement Rules — Social Security, Health Insurance and Pension

older woman sitting in an office talking on the phone

With 62% of retirees planning on working in retirement, you’re not alone if you feel that you’re not ready to stop working once you hit 65. But knowing the rules to working is vital to creating financial security.

 

According to the Society for Human Resource Management, more than one-third of adults within 20 years of retirement expect COVID-19’s financial effects to delay their retirement. 

 

Not to mention, a whopping 72% of people over the age of 50 say their ideal retirement includes some work. If yours does too, check out our articles on how to find a job after retirement and our list of the 9 best part-time jobs for retirees.

 

72% of people over 50 claim that their ideal retirement includes working in some capacity
The majority of Americans would like to work after retirement.

 

Whether you’re looking for a new way to fill some time or want to increase your financial security, there are many benefits and disadvantages to working after retirement

 

As more people continue working past 65, here’s what you need to know about working after retirement rules and how it affects your Social Security benefits, Medicare benefits, and pension.

 

What You Should Know About Social Security 

It can be challenging to navigate working after retirement rules, especially when considering social security benefits. It might be overwhelming when you just have many choices to make, such as when to start receiving funds, and how that affects your monthly earnings.

 

Only 3.5% of the population aged 60 or over never receive social security benefits. To maximize your benefits, here are some things to look out for. 

 

What Is My Full Retirement Age?

If you decide to receive Social Security benefits before your full retirement age, you won’t receive the full amount of your benefit. 

 

If you were born between 1943 and 1954, your full retirement age is 66. 

 

For every year between 1955 and 1959, add 2 months to 66 to get your full retirement age. 

 

the full retirement age for collecting social security benefits

 

For example, if you were born in 1956, that’s 2 years after 1954. So, you would add 4 months (2 x 2 months) to 66 to get your full retirement age.

 

Keep in mind that if you were born on January 1st, you refer to the previous year to calculate your full retirement age. 

 

So, if your birth date is January 1, 1967, calculate your full retirement age as if you were born in 1966. Use this rule for any Social Security calculations if your birthday is January 1st.

 

If that seems like a lot of calculations just to figure out when you should withdraw your Social Security benefits, use this social security retirement age chart that simplifies the math for you: 

 

social security retirement age chart
Source: Becu

 

Do Social Security Benefits Go Up if You Continue Work? 

If you’re at your full retirement age or older, you can keep the total amount of your social security benefits, regardless of how much you earn. 

 

Continuing working and paying taxes on your earning could result in your Social Security benefits going up. If it comes to that, you’ll receive a letter that will notify you of the increase in benefits.

 

Can You Collect Social Security at 62 and Still Work?

Once you turn 62 years old, you’re eligible to begin receiving social security benefits, whether you’re still working or retired. 

 

The benefit won’t be as significant, though, if you don’t wait to withdraw benefits until your full retirement age. 

 

In other words, if you can hold out for full retirement age, do it — there’s a bigger benefit.

 

What You Should Know About Health Insurance 

As you approach retirement, it’s also important to consider how your post-retirement plans will affect your healthcare coverage. 

 

A recent study showed that nearly half of Americans aged 50 to 64 worry they won’t be able to afford healthcare when they retire, while more than two-thirds are concerned about federal policy changes affecting their current health insurance.

 

45% of Americans aged 50 to 64 worry that they won't be able to afford healthcare

 

You can have both private coverage and Medicare when you retire. But you may want to reconsider your Medicare Part B enrollment if you have private coverage.

 

Health Insurance After Retirement Before Medicare

You may still be covered by your employer’s health insurance if you continue to work past the normal retirement age. 

 

If your employer has 20 or more employees, your employer’s insurance will be your primary coverage. Once you retire, you have 8 months to sign up for Medicare. 

 

For some, there might be a gap in coverage once your previous insurance policy is terminated and Medicare benefits kick in. If this is the case, you may want to opt for a short-term health insurance plan while you wait for your Medicare coverage to get started. 

 

How Does Working Affect My Medicare Benefits?

You can benefit from private insurance and Medicare simultaneously, but there are a few things to keep in mind.  

 

If your employer has more than 20 employees, you may want to disenroll from Medicare Part B to save yourself some money. In this case, Medicare acts as secondary insurance only if your employer’s insurance doesn’t cover the total cost of your medical bill.

Also, be sure to enroll during the designated enrollment period to avoid paying high costs for health care. 

 

Once enrolled, whether while you’re employed or retired, be wary of whether or not your providers accept Medicare assignment, even if Medicare is your secondary insurance. 

 

This will also save you money since non-participating or opt-out providers can charge you more than the Medicare-approved amount, regardless of whether you’re working or retired.

 

What You Should Know About Your Pension 

Working after retirement rules can vary from pension plan to pension plan. So read yours carefully and consult with your former employer to answer any questions.

 

Collecting Pension While Still Working

Unfortunately, there’s no one-size-fits-all rule about how working post-retirement affects your pension. We recommend looking into your plan to find out how working may affect your pension.

 

Most times, you can work full-time with a different employer and your pension won’t be affected by your earnings. 

 

Again, while there’s no absolute standard across all pensions for returning to work for the same employer, the situation could be entirely different. So just contact your HR department to go over your pension details.

 

#1 Rule of Working After Retirement

Retirement can be an exciting new chapter in your life — even if you decide to continue working during those years.  

 

To help reduce your financial stress so you can truly enjoy your retired life, it’s important to understand how working in retirement will affect Social Security, Medicare, and your pension. 

 

And of course, remember that true happiness doesn’t come from a balance sheet or withdrawing money out of an account. It comes when you’re doing something that makes you feel valued in this world. And that is the #1 rule of working after retirement. 

 

Financial security is important, but it’s just one part of the overall picture (and of the 5 Rings of Retirement). The memories you create and experiences during your retirement years are what make your life meaningful.

 

Which, by the way, if you want more passion and purpose during retirement, just head over to our Purposeful Retirement workshop