Texas Trust Retirement Planning Advice

Retirement Planning

Supplementing Your Retirement Income

Retirement is something you may have been looking forward to for quite some time. You may have been saving for it since you began working with the hopes of leading a comfortable lifestyle once you are no longer officially bringing in a consistent and well-earned weekly, bi-weekly or monthly paycheck.

However, a few complications, such as people living longer than expected after retirement and the upheaval in the market that took place during the Great Recession, may have put a few wrinkles in your plans.

That has left many people, perhaps just like you, looking for ways to supplement their retirement incomes. The good news is that there are plenty of opportunities available for you to do just that. However, you must make sure you do not cross specific lines with Uncle Sam, or you could face a few unexpectant and unpleasant penalties for doing so.

Here’s what you need to know to avoid making costly missteps while supplementing your retirement income.

Income Limits in Retirement

According to the Social Security Administration (SSA), income limits mostly only apply to Social Security Benefits for people who are not yet at full retirement age. Full retirement age is the age at which you qualify for 100 percent of your social retirement benefits each month. For many years, that age had been 65. That has changed now if you born in 1938 or later that age will gradually increase to 67 for people born in 1960 and beyond.

If you have not yet reached full retirement, in 2018 annual earning limits are $17,040. Any earnings above that amount will result in a decrease in your monthly retirement benefits.

For those who will reach full retirement age in 2018, limits on earnings in the months leading to that date are $45,360. For this purpose, the SSA only considers earning for the one month before your full retirement age.

This includes income from the following:

  • Bonuses
  • Commissions
  • Profits for self-employed workers
  • Vacation Pay
  • Wages

It does not include income from the following, though:

  • Annuities
  • Earned interest
  • Investment income
  • Military retirement benefits
  • Other government benefits
  • Pensions
  • Veterans benefits

Once you reach full retirement age, you have no limits on your earned income and will continue to receive your full benefits.

Opportunities for Generating Retirement Income

Generating income during retirement is more manageable than you might believe. Most retirees do not need to rely on a full-time salary. In fact, some are only looking to supplement their incomes, make their funds last longer, or afford a few desirable luxuries during their golden years. That means you do not need to embark on a new career to make ends meet, though you could enjoy a nice part-time income or turn a hobby into a little extra cash. These are a few ideas you might want to consider for retirement income.

  • Become a consultant (turn your past experience and knowledge into cash).
  • Drive for Uber or participate in the “sharing” economy in other ways.
  • Find a job for fun (become a golf pro, work in a wine shop, get a job at a community museum, or teach art classes).
  • Invest in real estate.
  • Get a position in retail sales.
  • Start your own business.
  • Teach community classes.
  • Become a greeter at big box store.
  • Obtain temp work through staffing agencies.
  • Become a maintenance worker at a camp or RV park.

There are nearly endless opportunities to earn money during retirement to supplement your income or fund your dreams.

Benefits of Working in Retirement

Oddly enough, the benefits of working in retirement are far more than financial. While some people initially decide to work during retirement for economic reasons, many keep working throughout retirement for reasons that are deeply personal. These are just a few benefits you can experience by working during retirement.

  • Allows you to try a new line (or lines) of work.
  • Better health coverage, in some cases, than Medicare provides (and often at lower premiums).
  • Provides a sense of purpose.
  • Helps you stay physically active.
  • Keeps you socially active and meeting new people.
  • Sharpens mental faculties because you are constantly learning new things.

The bottom line for some people, though, is that they just enjoy working and wish to continue doing so.

Of course, then there are the financial benefits to consider for working during retirement. Many of these are too big to be discounted or ignored. That is especially the case for retirees who are concerned that their nest eggs are not sufficient to meet their needs and expectations. That includes reasons like the following:

  • Boost your Social Security benefits. Delaying the receipt of Social Security benefits boosts those benefits by eight percent per year from the time you reach full retirement age until the age of 70.
  • Reduce the number of years you need to draw from your nest egg.
  • Opportunity to fatten your nest egg by adding to it.
  • Larger pension if you work for an organization that still offers them and assuming you remain in your position rather than taking a new one.

Retirement does not mean you have to sit at home and take up knitting, not that there's anything wrong with that. Many of today’s retirees are more energetic and active than ever before. Sometimes, that requires a little creative financial planning before retirement, and at other times, it might mean you want to continue earning well into your retirement. It is your retirement, so do what you please.

Please note, information and interactive calculators are made available to you as self-help tools for your independent use and are intended for illustrative purposes only. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.