During the first years of the COVID-19 pandemic (are we still in a “pandemic?” I’m never sure on that, though certainly COVID is still a presence), many people on the verge of retirement made that decision and did indeed retire.

However, a significant number of those individuals appear to have regretted their decision, and retirees are now returning to the workforce. Reasons include the desire for more income, of course, but also a longing for the socialization work provides. Often, retirees miss that sense of community and the sense of working with others toward a shared purpose.

If you retired during the COVID years, or before or since, and are now considering a return to work, there are financial planning aspects you should consider.

Social Security

If you elected to take your social security benefits and were and are still under your full retirement age (check your social security calculator for this information), you may have some of your benefits withheld or clawed back.

Those under full retirement age who:

• Receive social security benefits and
• Earn income from working

may have their Social Security benefits reduced by $1 for every $2 they earn above the $23,400 threshold (as of 2025) before the year they reach full retirement age.

During the year a social security recipient reaches full retirement age, the earnings threshold and reduction changes occur – the benefit reduction drops to $1 for every $3 earned. For 2025, the earnings threshold rises to $62,160.

However, if you decide to return to work less than a year after applying for social security benefits, you can apply to withdraw that application and perhaps wait until you reach age 70 to take the maximum amount of your social security benefits. Waiting after age 70 will not increase your benefits further – but your current earnings will, down the road!

You can also, any time before you reach age 70, suspend the payment of your social security benefits – and receive credit for the months you didn’t take payment once you do get that age, in addition to any added benefits based on your current earned income.

There is also the question of taxes on social security benefits. While President Trump has promised to make Social Security benefits non-taxable, significant developments are currently underway. Congress is currently debating whether to pass a tax bill as a separate item or include it in a large, omnibus bill. President Trump has also floated the idea of abolishing the income tax altogether, replacing it with tariffs, and Representative Earl L. Carter (R-GA) has introduced a House bill to replace the income tax with a broad-based consumption tax.

When there is anything concrete to report, we will do so. However, at present, we suspect that the income tax will remain in some form.

But for now, social security benefits may be taxable in part, based on your combined income.

Combined income is the sum of your modified adjusted gross income (MAGI) plus 50% of your social security benefits.

MAGI is defined as your adjusted gross income (AGI, not your taxable income – AGI is calculated before tax deductions) plus tax-exempt interest earned or accrued.

If you file as an individual (including head of household and qualifying surviving spouse), and your combined income is between $25,000 and $34,000, 50% of your social security benefits are taxable. The income level rises to between $32,000 and $44,000 for married taxpayers filing jointly.

Combined income above those thresholds can bring the percentage of social security benefits subject to income tax up to 85%.

Consult with your virtual CFO or other trusted financial and tax advisor, such as those at Rigby Financial Group, to develop a strategy that protects your Social Security benefits and maximizes your retirement income.

RMDs

If you haven’t reached age 73 and haven’t taken RMDs from your retirement accounts, you have no consequences to worry about.

But if you have started taking any RMDs, once you return to work, you may be in a higher tax bracket than while you were retired – and RMDs from traditional (non-Roth) retirement accounts are taxed as ordinary income.

So, your RMDs may be subject to higher tax levels than they were before your return to work.

However, again, if you have not taken, nor were required to take, RMDs, and return to work for a prior employer, you may be able to make additional contributions – and receive any employer matching contributions – to that retirement plan.

Final Thoughts

You may, after trying retirement, find that working, either full-time or part-time, is just the thing you need. Indeed, we know just how satisfying and rewarding a job well done can be!

However, be sure to protect yourself as much as possible.

We invite you to consult with RFG’s specialists – we can help you navigate the waters at each stage of your career and of your life overall.

We will help you craft a financial and retirement plan that takes into account your return to work, together with all your goals and dreams, and protects you as far as possible against contingencies.

Please click here to email us directly – let us help you chart your course with confidence and joy – that’s what we are here for!

Until next time –

Peace,

Eric