Have you thought about earning extra money during your retirement? Maybe you hope to work part-time just to supplement your income. If you’re thinking about that you should know the rules about earning extra money and the impact on your Social Security benefits. Knowing the rules can help you avoid getting in trouble with Uncle Sam.
Income Limits in Retirement
The Social Security Administration (SSA) has set income limits for people who are receiving Social Security Benefits but are not yet at full retirement age. For people born before 1960, that age is 65, but for people born in 1960 and beyond, the age is 67.
When you reach full retirement age, you will receive 100 percent of your retirement benefits, and there are no limits on the amount of supplemental retirement income you can make.
You can start receiving Social Security benefits early at age 62, but it’s a reduced amount if you decide to do this before full retirement age.
If you decide to receive Social Security benefits before full retirement age and decide to work part-time to bring in extra money, there is a limit to the amount you can make before your benefits are reduced even more. As of 2021, that annual limit is $18,960.
If you make more than that while also receiving Social Security, your benefits will decrease. It is up to you to decide what makes sense for your financial situation.
Opportunities for Earning Extra Income During Retirement
If you do decide to earn some extra income during your retirement, there are plenty of opportunities to consider. Depending on your needs and time commitments, here are some ideas you might want to consider for supplemental income:
- Become a consultant (Turn your prior experiences and knowledge into cash).
- Drive for Uber, Lyft, or a delivery service company such as Door Dash.
- Find a job that incorporates enjoyable hobbies – become a golf pro, work at a winery, get a job at a community museum, or teach art classes.
- Invest in real estate.
- Get a position in retail sales.
- Start your own business.
- Teach community classes.
- Become a greeter at a superstore.
- Obtain temporary work through staffing agencies.
- Become a maintenance worker at a camp or RV park.
There are numerous opportunities to earn money during retirement to supplement your income and fund your dreams.
Benefits of Working in Retirement
There are many significant financial benefits that come with the decision to work during your retirement. It’s a decision more and more people are making because of rising healthcare costs and longer life expectancy.
It’s not uncommon for people to live into their 80s and beyond. You may need some extra money to cover those extra years of life. Here are some of the benefits that come from working during your retirement:
- Boost your Social Security benefits. Delaying the receipt of Social Security benefits boosts those benefits by eight percent per year from the time you reach full retirement age until the age of 70.
- Reduce the number of years you need to draw from your nest egg.
- Opportunity to fatten your nest egg by adding to it.
- Larger pension if you work for an organization that still offers one and remain in your position rather than taking a new one.
For many people, the benefits of working during retirement are far more than just financial. While some people initially decide to work during this time for economic reasons, many keep working throughout retirement for personal reasons. These are just a few of the advantages of continuing to work:
- Better health coverage (in some cases) than Medicare provides, and often at lower premiums.
- The ability to try a new line (or lines) of work.
- Provides a sense of purpose.
- Helps you stay physically active.
- Keeps you socially active and meeting new people.
- Sharpens mental faculties by constantly learning new things.
Retirement doesn’t automatically mean a transition into a slow, sedentary life. Many of today’s retirees are more energetic and active than ever before.
Sometimes that requires a little creative financial planning before retirement, and quite possibly, it might mean you want to continue earning well into your retirement.
A good understanding of the rules on how you can earn extra money during retirement will ensure you are able to take full advantage of your hard-earned time to enjoy life.
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