Unretirement can be expensive – watch out for these surprise costs

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Going back to work after retirement can bring the renewed luxury of a paycheck, but there are some potential hiccups to re-entering the workforce that require some planning.

A tight labor market, high inflation, waning pandemic concerns – and perhaps a case of boredom – have prompted many retirees to consider going back to work. 

One in six retirees is considering returning to work after being out of the workforce for an average of four years, according to a recent study from Paychex. A total of 55% of retirees went back to work because they needed more money.

Read: Want a happier, more fulfilling retirement? Try this Japanese concept.

Among adults aged 65 to 74, the workforce participation rate was 25.8% in 2021, according to the U.S. Bureau of Labor Statistics. That share is expected to grow to 30.7% in 2031. In the 75-and-older segment, the portion in the workforce is expected to reach 11.1% in 2031, up from 8.6% in 2021, according to BLS.

“We’re having conversations with clients now more than not – people are thinking of going back to work and want to know how,” said Robert Gilliland, managing director and senior wealth adviser with Concenture Wealth Management. “You can only play golf or you can only fish so much. They’re bored.”

Unexpected expenses, such as healthcare costs, can also force people back into the workforce, Gilliland said. 

“The decision to retire is done at the height of emotion. It’s a change in lifestyle. It’s a tremendously emotional decision. Going back to work gives people a feeling that they’re still useful, that their productivity can still benefit society and they can still make money off their skills – it makes them feel worthy,” Gilliland said.

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Social Security benefit reduction

If someone goes back to work after retiring, the complications come in when you’ve already started taking Social Security but have not yet reached the full retirement age of 67. 

“If you’re not getting Social Security yet, it’s not complicated. If you’re taking Social Security already, you will get penalized. You need to weigh the benefits and costs,” said Craig Ferrantino, president of Craig James Financial Services LLC. 

If you started taking Social Security and it’s been less than one year, you can return those benefits to the government and start Social Security again at a later time, Ferrantino said.

If you’ve been taking Social Security longer than a year, you can earn $21,240 in 2023 and see no impact on your Social Security benefits. If you earn more than that amount, however, Social Security will reduce your benefits by $1 for every $2 you earn.

In the year you reach full retirement age, Social Security holds back $1 for every $3 earned over a certain threshold. If you reach full retirement age in 2023, the limit on your earnings for the months before full retirement age is $56,520. Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings, according to the Social Security Administration.

“If you’re going back to earn income to make ends meet, make sure you’re going to earn more than the reduction will be,” Gilliland said. “At the end of the day, you’ll end up with more income.”

Going back to work has one financial plus: Since Social Security payouts are based on your highest 35 years of income, the additional salary you make in “unretirement” may boost your Social Security benefits by replacing or filling in years where you earned less money.

Read: Will working while receiving Social Security increase my benefit?

(Two handy resources from the Social Security Administration: the Retirement Age Calculator to find your full retirement age based on your date of birth and the Retirement Earnings Test Calculator to find out how much your benefits will be reduced.)

The Social Security Administration looks at wages you make from your job or your net earnings if you’re self-employed. It also looks at bonuses, commissions, and vacation pay, but doesn’t count pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits.

The withheld benefits aren’t lost. Your benefit will increase at your full retirement age to account for benefits withheld due to earlier earnings, according to the Social Security Administration.

Read: I took Social Security at 62 and now regret it. Is there a way to increase my Social Security benefit?


 Healthcare expenses are another major reason people return to work.

You automatically qualify for Medicare at 65, but your company’s health plan may offer additional coverage in tandem with Medicare. 

More income brings the potential of higher premiums. Medicare looks at modified adjusted gross income, so higher income beneficiaries pay a premium surcharge for Medicare Part B (outpatient coverage) and Part D (prescription drug coverage). 

Medicare Part A comes with no premium as long as you have a 10-year history of contributing to the program through payroll taxes. For 2023, Part B comes with a standard monthly premium of $164.90 and Part D premiums will average $43 this year.

“If you’re going to earn more than $194,000 jointly or $97,000 as a single filer, you will end up paying more for Medicare,” Gilliland said.

This means it’s worth considering how extra income from a job could affect what you pay. 

Also, once you enroll in Medicare, you’re no longer eligible to contribute to your company’s health savings account (HSA).

Remember, Medicare looks back at the last two years of income. Once you have left the high-income job and have lower retirement income for two years, be proactive about contacting Medicare to look back at the most recent two year span otherwise your Medicare Part B premiums still be at the higher level, said James Regan, financial adviser and partner with SharpePoint, a wealth management firm.


By April 1 of the year after you turn 73, you must start taking required minimum distributions from your tax-deferred retirement accounts, such as traditional IRAs and 401(k)s.

If you’re working at age 73, however, you can delay RMDs from a 401(k) with your current employer to April 1 following the year you retire. But remember to take the RMDs from 401(k)s you have with former employers on the standard schedule or you’ll face a potential 50% tax penalty.

“All of this can be sorted out with a little help. The decision to go back to work is very personal. For some people, it has to do with quality of life and sense of purpose,” Gilliland said. “People are excited. They can do it on their terms. They may be allowed to work remotely. It keeps them engaged.”

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