5 Ways Unretiring Might Cost You Money

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Some people view retirement as a finish line you run across after decades of hard work. But for some (depending on their budget ), retirement is another leg of the race you run, albeit at a slower pace.

Some people unretire because they need to earn extra money, while others enjoy working on new projects and interacting with coworkers. Whatever the reason, recent T. Rowe Price data shows that 20% of retirees work full or part-time, and another 7% are looking for work.

But going back to work could cost you money in some unexpected ways. Here are some to consider if you're a retiree thinking of returning to the workforce.

1. You might pay more in taxes

If you're an individual and earn less than $25,000 annually, or are married, filing taxes jointly and have a household income of under $32,000, then you don't have to pay taxes on your Social Security benefits.

Unfortunately, earning anything over those amounts could cost you. The IRS says you could pay taxes on between 50% to 85% of your benefits, depending on how much you earn.

If you want to earn income and still receive your maximum Social Security benefit, you should consider how much you'll earn at your job and calculate whether your new position will take you over the threshold. About 40% of Social Security benefit recipients pay some federal taxes on them.

2. Your work expenses could add up fast

There's no getting around the fact that working often costs employees money. Even if you unretire and work from home, you might have to get a new computer, spend money on your home office setup, or even upgrade your home internet service.

And retirees who go back to work in person likely have even more expenses. A 2023 Owl Labs report showed that 66% of workers who go into the office spend an average of $51 more per day than those working from home.

The two biggest daily expenses were pet care and lunch. While your costs may vary, it might be wise to calculate the credit card hit for those expenses before returning to work.

3. You may pay to commute

If you have to commute to work, it's going to cost you some cash. The average American spends $1,249 annually on fuel and vehicle maintenance.

And then there's the time it takes to get to and from the workplace. According to Clever Real Estate, the average employee spends 200 hours per year commuting.

A recent Resume Builder report showed that 90% of U.S. companies will have a return-to-office policy by the end of 2024, but many of them also offer hybrid schedules. So even if you find a remote position soon, it might be a good idea to ask what the hybrid work policy is.

4. Your healthcare costs might go up

Many retirees rely on Medicare after they stop working, but if you rejoin the workforce, your premiums could potentially increase.

For example, Medicare Part B premiums cost $174.70 per month if you're an individual with a modified adjusted gross income of $103,000 or less, or filing jointly with a household income of $206,000 or less.

Earning more than those thresholds will likely push you into a higher-priced tier. The next-highest amount you could pay is $244.60 per month, and it continues to go up from there.

5. You may receive reduced Social Security payments

A significant drawback for some people considering unretiring is that their current Social Security payments could be reduced.

The Social Security Administration (SSA) says that if you haven't reached full retirement age in 2024, your benefits will be reduced by $1 for each $2 you earn above $22,320. If you reach full retirement age in 2024, the SSA will deduct $1 for every $3 you earn above $59,520 until you reach full retirement age.

The good news is if you've already reached full retirement age and go back to work, you can earn as much as you want and still keep all of your benefits.

If you're deciding whether to return to work, spend some time calculating the additional expenses you might have to pay, potential tax increases, and reductions in your Social Security benefits. Doing so could help you determine what jobs might be the best option and how many hours you should work each week.

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