Are You Considering Working During Retirement?

Years ago, when individuals retired, they no longer worked. Today, things have changed. According to a recent Employee Benefit Research Institute survey1 conducted in 2011, 74% of Americans polled indicated that they planned to supplement their retirement income by working. This is up 2% over that of 2009.

Why Many Plan to Work During Retirement
Although you may gain personal fulfillment from working, there may also be other reasons why you—like so many others—may think you need to work during your retirement years:

  • The lack of availability of traditional pension plans (which provide a guaranteed retirement income to those participants who qualify)—according to the Bureau of Labor Statistics, the percentage of workers covered by defined benefit (pension) plans dropped from 32% in 1993 to 20% in 2007.2
  • Insufficient retirement savings;
  • Increasing life spans (you may be afraid you’ll outlive your retirement savings);
  • Rising health care costs and declining health care coverage; and
  • The recent economic downturn eroding the value of many retirement savings accounts.

Working in Retirement: The Shift from Part-time to Full-time
It used to be that those who worked in retirement (ages 65+)—referred to here as “retired” or “older” workers—tended to choose part-time employment. But in the mid-1990’s, that began to change: Between 1995 and 2007, the number of retired workers who were employed full time increased almost 100%, whereas the number of part-time older workers increased only 19%. Consequently, as of 2007, the majority of older workers in the workforce (56%) were classified as “full-timers”—as opposed to 1995, when older, full-time workers represented a minority (44%) of the workforce.2

Important Considerations About Working in Retirement
Instead of working full time in retirement, some individuals become what is referred to as a “phased retiree.” This refers to a worker who eases into retirement—by working fewer hours, part time, or in a different role from their previous job—without leaving the workforce completely. But whether you are considering working full time or part time during retirement, here are some important considerations:

  • Phased retirees may not be able to draw a pension and a salary from the same employer.3
  • Many employers do not offer health benefits for phased retirees, so check with your employer or prospective employer for more information.
  • If you continue working after you have started collecting Social Security, but before reaching what the Social Security Administration (SSA) defines as your “full retirement age” (i.e., the age at which you may collect full benefits), your Social Security benefits will be reduced after your earnings reach a certain level (established by the SSA).4
  • Your Social Security retirement benefits will become subject to income taxes if your earnings exceed a threshold figure set by the SSA.5

The Tools to Help Prepare for a Better Retirement
Only you can decide if it makes sense to work during retirement. But an important step in helping you make that decision is to determine how much retirement income you may need. That’s why Prudential Retirement® has developed five “Retirement Readiness” questions. Our Retirement Planning Workbook can help you turn your answers to those five questions into actionable steps you can take today to work toward greater long-term financial security. If you would like personal assistance in devising your own retirement income strategy, be sure to consult a financial professional or a Certified Prudential Retirement Counselor*. Simply call 1-877-PRU-2100 toll free, Monday through Friday, from 8 a.m. to 6 p.m., ET.


*Many of Prudential Retirement’s Personal Retirement Services Retirement Counselors carry the distinct designation of Certified Retirement Consultants, an advanced certification available through the International Foundation for Retirement Education (InFRE). Certification includes mastery of retirement plan design, investment strategy, retirement income management, and retirement readiness and counseling.

1 EBRI 2011 Retirement Confidence Survey®
2 “Spotlight on Statistics: Older workers,” Bureau of Labor Statistics, July 2008
3 The Pension Protection Act of 2006
4 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 $14,160. 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 $37,680 ($3,140 per month). Source: SocialSecurityOnline.
5 Currently $25,000 for individuals or $32,000 for couples filing taxes jointly. Source: Social Security Administration. "Answers to Your Questions: 'Do I have to pay income tax on my Social Security benefits?'"
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