A reader wonders if he can plan for retirement with the expectation that he will be working a part-time job. But that income may affect some of the perks of retirement.
.“Is it okay to plan for my retirement expecting that I’ll be working a part-time job somewhere? Or should I plan with the expectation that I won’t be working, and then if I do, that will just be extra money I have? If I do work after retirement, is there anything I should be aware of?”
It is best to figure your retirement income without planning on any extra earned income in retirement. This is because:
1. You may not even want to work after age 65 once you get there.
2. Even if you want to work, health issues including disability (worse possible case) might prevent you from doing so.
3. Lastly, the job market might be such that working part time won’t glean enough money for it to be worth your effort.
Additionally, it is judicious to recognize that wages from working part time can decrease the value of Social Security benefits to you if you receive them before your full retirement age. Though this might be a small consideration if you have more than sufficient retirement income, it is still something to consider. Why give back what is yours to take, even temporarily? Please note that the lost benefits are re-instituted at full retirement age.
Medicare benefits are even trickier where earned income is concerned. Although Part A is free if you paid the tax while working, the remainder of Medicare plans including B, C and D require premiums. The premium for B and D is affected by income. The higher it is the greater the premium. This means that working in retirement could translate into larger B and D premiums, which could make a four-hour workday less attractive. Needless to say, we can only expect that the penalty for earning more in retirement will be greater in the future for both Medicare and Social Security.
So, although it is optimistic that you plan to work in retirement and suggests that you like what you do, it is not known that by the time you hit retirement you will still be able to or want to pound the pavement. If you can though, and choose to do so, it is likely to put more change in your pocket, but maybe not as much as you deserve and would wish.
Shirley M. Mueller is the founder of MyMoneyMD, LLC and a regular contributor to Physician’s Money Digest.