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Working During Retirement
To supplement the three traditional sources of retirement income—Social Security, Employment-Based Plans, and Personal Savings—many Americans intend to work in some fashion during their retirement years. The reasons are clear:
- Increasing life spans
- Longer retirements
- Rising healthcare costs and declining healthcare coverage
These trends are coupled with the decreasing availability of traditional pension plans and the general insufficiency of Americans' retirement savings. Such issues give rise to some considerations that are different for today's retirees than they were for their parents—including views on working during retirement.
Working for different reasons
Some individuals wish to work during their retirement years for personal fulfillment. Many others do so out of economic need, given the trends in pension and healthcare coverage. A recent Prudential Financial survey indicates that most pre-retirees intend to work at least part time in retirement.
Barriers to working in retirement
Despite the desire and/or need to work in retirement, retirees often face impediments in trying to do so:
- Often, phased retirees (workers who "phase" into retirement by voluntarily reducing hours worked) cannot draw a pension and a salary from the same employer.1
- Almost one-third of employers do not offer health benefits for phased retirees.2
- Individuals who are receiving Social Security benefits but who have not reached full retirement age lose one dollar in benefits for every two dollars earned over $13,560. In the year they reach full retirement age, until the month they reach full retirement age, they lose one dollar in benefits for every three dollars earned over $36,120 ($3,010 per month).3
- Social Security retirement benefits become subject to income taxes if earnings exceed a threshold figure, currently $25,000 for individuals or $32,000 for couples filing taxes jointly.4
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