Retirees Want to Return to Work – But Should They?

Retirees may un-retire

By Michael Berkhahn, CFP® 
For millions of baby boomers, the retirement plans they carefully crafted over decades were severely shaken due to the pandemic. For a variety of reasons, many pre-retirees found themselves exiting the workforce earlier than anticipated. Fast forward to 2024, and the economic landscape post-pandemic is still full of challenges, including the highest inflation rates since the 1970s. This new environment has left a significant number of early retirees grappling with the harsh reality of financial strain, prompting many to “un-retire.”

A recent study conducted by T. Rowe Price reported that 55% of retirees who are working or seeking employment are doing so out of financial necessity, while another 49% say work provides them a sense of meaning and fulfillment. While it can be enjoyable to earn a paycheck and be surrounded by a social network, it is crucial to weigh the implications of existing retirement benefits before making this decision.  
Social Security  
For those drawing Social Security benefits before reaching Full Retirement Age (FRA), exceeding annual earnings limits can result in reductions to your benefits. In 2024, earning over $22,320 incurs a $1 reduction in benefits for every $2 earned above this threshold.  

Healthcare for Retirees
The financial impact of “unretiring” also extends to healthcare costs, particularly Medicare premiums. Higher-income earners may face increased premiums for Medicare Part B and Part D through the Income-Related Monthly Adjustment Amount (IRMAA), with MAGI thresholds of $103,000 for single filers and $206,000 for joint filers in 2024. There are additional income thresholds that cause extra premium hikes as a household earns more income, compounding the financial burden.

Related: Is $1 Million Enough to Retire in Florida?

Decisions about whether or not to draw from a retirement account shift when you reenter the workforce. Required Minimum Distribution (RMDs) are mandatory for retirees aged 73 and over – unless you are still contributing to an employer-sponsored retirement plan. While you’re exempt from withdrawing RMDs from an employer-sponsored retirement plan, you are still required to take RMDs from your previous retirement accounts that you are no longer contributing to. Failure to comply with RMD requirements incurs a steep 50% tax penalty on the mandated distribution amount, underscoring the importance of navigating retirement account requirements effectively.  

The decision to re-enter the workforce after retirement demands careful consideration of various factors. Consult with a financial professional to get a complete understanding of all financial impacts, and navigate the path of un-retiring with informed clarity and confidence.  

Michael Berkhahn, CFP®, is Vice President of Graham Capital Wealth Management, an independent Registered Investment Advisor that specializes in providing investment management strategies for high net-worth families, foundations and pension plans. As a CERTIFIED FINANCIAL PLANNER™ practitioner, Berkhahn is part of an elite group of advisors who have completed the necessary training and requirements to hold the CFP® designation and is a fiduciary committed to complying with its continuing education and ethics standards.