Returning to work can prove to be challenging for retirees
Seniors advised to consider impacts on taxes, benefitsFebruary 15th, 2018
While most Inland Northwest seniors probably see retirement as a well-earned break from years of hard labor, some retirees find themselves re-entering the rat race.
Some return to work out of necessity, while others choose to work simply to stay active and engaged in their community. But whatever their reasons, financial advisers and employment experts here say seniors should be aware of potential challenges they face in returning to work.
Don Moulton, co-founder of Spokane Valley-based Moulton Wealth Management Inc., says while the majority of his clients are retired or nearing retirement, he does see some seniors looking to re-enter the workforce.
“Most of those clients fall under one of three scenarios,” he says. “Some have to return to work due to unforeseen circumstances. Some are retired but still wish to work part time or as a consultant, and some just miss working.”
Moulton says his goal as a financial adviser is to help clients plan ahead to avoid the first scenario.
“Most seniors I see who are returning to work are looking for part-time positions to stay active or ease their transition into full retirement,” he says. “In cases where the client isn’t returning to work voluntarily, we’d be looking to help them find a balance again, cutting expenses and increasing income so they can save and eventually retire fully,” he says.
He adds, “Unfortunately for some, the only way to increase income is to go back to work.”
From a financial perspective, Moulton says the biggest considerations for seniors returning to work will be to know how much they’ll still receive in Social Security benefits, and how returning to work might affect their health care coverage.
“A lot of this will depend on your age and whether you’re already collecting benefits,” he says. “If you start receiving Social Security after reaching full retirement age, you receive full benefits regardless of your earnings.”
Moulton says working seniors who are collecting Social Security, but haven’t yet reached full retirement age, will typically see smaller payouts during the period in which they’re working.
“If you start receiving your Social Security payouts early, but you’re still working and earning more than $17,040 (the annual limit for 2018), your benefit is reduced by $1 for every $2 above that limit,” he says.
He says seniors who are concerned about keeping those benefits should track their hours and income carefully to ensure that what they’re bringing in doesn’t exceed those limits. Seniors considering a return to the workforce also need to remember they may need to pay taxes on their Social Security benefits.
“If you earned other income during the year, from a job or investments, up to 85 percent of your Social Security benefit may be taxable,” he says. “Just be aware that the more income you bring in, the higher you’re taxed.”
Moulton says for those under the age of 70, returning to work could have some benefits, at least in the form of additional retirement savings.
“Seniors under 70 who are earning income still have the opportunity to put a portion aside into a retirement account such as an IRA (individual retirement account) or 401(k),” he says. “That way, when you do fully retire you could have a little more savings waiting.”
Besides Social Security, income, and savings considerations, Moulton says seniors returning to work should also look into changes in their health care coverage.
“If you are covered by Medicare, you should consider whether an employer’s insurance benefits will change your coverage,” he says. “I’d advise speaking with your company’s plan administrator to find out what’s covered by the group plan, as those typically pay first, before Medicare benefits kick in.”
Sandra Moore is project director for the Senior Community Services Employment Program that helps low income senior citizens ages 55 and over to get back into—or remain active in—the workforce.
“SCSEP participants must be 55 or older, low income, and unemployed at the time they apply, and they’re paid minimum wage at their assignments,” she says. “Most of the seniors I work with are 60 to 65 years old, and I’d say 95 percent have been out of the workforce for two or more years.”
Developed by and funded through the U.S. Department of Labor, the SCSEP program is run by nonprofit organizations and government agencies.
Moore says the American Association of Retired Persons Foundation is responsible for operating the SCSEP program in Spokane, as well as 16 other Washington counties.
“We have about 90 participants in the program right now, 70 of those being participants in Spokane and its surrounding counties,” she says. “We work through the Spokane office at 222 W. Mission, as well as three satellite offices in Kennewick, the Tri-Cities, and Walla Walla.”
Similar to Moulton, Moore says the questions she gets most often from seniors returning to the workforce are those concerning health coverage, Social Security, and disability benefits.
“The goal of the program is to find permanent employment, so seniors need to be aware of how obtaining a permanent job might change their eligibility for coverage,” she says. “For some it’s a challenge to find an opening because they’re only able to work certain hours, or make a certain amount of income.”
Other than understanding how to navigate potential financial concerns, Moore says the other big challenge facing most of the seniors she works with is a lack of computer knowledge.
“Most know how to browse the internet or play games, but they haven’t operated a computer in an office or workplace setting,” she says. “We do have some training funds available for participants to take courses at area colleges to improve their skills, and we also occasionally work with them one on one to develop familiarity with online application processes.”
One senior who has made helping retirees to access technology and job resources a post-retirement goal, is 69-year-old Molly McClelland.
McClelland is a marketing consultant and former owner of McClelland & Associates, a San Diego-based marketing and advertising company she started in 1990 and moved to Spokane in 2007.
She says an unexpected health crisis in 2011 forced her to cut back on her consulting work, and the sudden loss of business income was a shock.
“I advise others to always have a Plan B ready just in case their Plan A falls apart,” she says. “That said, I’m proof that one can emerge from what seems like disaster to make a life that works even better than the one they had planned.”
Once she’d recovered from the health crisis, McClelland says she’d expected to retire but found herself restless and in need of a way to connect with people going through the same transitioning experience.
It was then that she decided to use her marketing skills to start Senior Spokane, a website that serves as a resource for seniors seeking new ways of living and working past the age of 60.
In talking with retirees, McClelland says she’s found most have three simple goals; to feel useful, provide a needed service, and enjoy themselves in the process.
“Financial pressures might force some of us to work longer than we’d planned, but we want that work to serve a larger purpose and even be fun,” she says.
Moore says like her, some seniors she’s spoken with have considered starting their own businesses, although she’s cautious about advising them to do so.
“Most of these folks are concerned about finances, and they should be,” she says. “I always advise them to see their financial planner and/or do a very careful assessment of their resources before even thinking about starting a new business.”
“I hate to see anybody chase an unrealistic dream and spend their hard-earned savings, especially those in their 60s and beyond,” she says.
“I’ll often suggest volunteering in their field of interest first, as this gives them more knowledge of their chosen industry without depleting their financial reserves,” she says. “Sometimes they find that volunteering is enough.”
Moulton says he also would advise caution for retirees who may be considering investing their savings into starting a new business.
“I’d encourage them to think carefully first, it all depends on how well the client is positioned financially,” he says. “Small businesses are risky, and most fail because they can’t grow quickly enough to turn a profit.”
“People also tend to forget when you pull savings from a retirement account you still need to pay taxes on it, which can deplete savings more quickly than you think,” he adds.
Looking ahead, McClelland says her goal is to continue the Senior Spokane website, filling it with new resources and options that can help seniors navigate life after 60.
“I am retired now, but not sidelined or idle,” she says. “Senior Spokane gives me a purpose and a platform to explore a wide range of subjects that interest me and my peers.”