CHRONICLE-Back to work but close to retirement? Adjust your package

(Views expressed here are those of the author, columnist for Reuters.)

By Mark Miller

April 21 (Reuters) – The Great Retreat is turning into the Great Return, with the U.S. jobs report for March released earlier this month showing a return to the labor force among older workers. This reflects the plentiful number of jobs available – and diminishing concerns about the health risks associated with COVID-19.

The pandemic has forced millions of older workers into early retirement, forcing many to stop saving and claim Social Security sooner than expected. This deprived them of the possibility of increasing their monthly benefits later through a deferred application.

Working longer is a great way to increase your retirement income. But if you count yourself among the “back to work” crowd, your retirement plan may need an adjustment — especially Social Security and Medicare enrollment.


If you have applied for Social Security but have returned to work, you have a few options to reapply deferred.

You can withdraw your claim within 12 months of the start of benefits – but this strategy might not be attractive, as you will have to repay all benefits that have been paid up to that point.

The second option is to suspend retirement benefits at full retirement age (FRA) or later to earn deferred retirement credits. But Social Security also allows you to suspend benefits when you reach your FRA – 66 and a few months for most people who are now approaching retirement. You can then start earning deferred credits up to age 70 again. You can only do this once, but being late could significantly increase your benefits later.

Your monthly Social Security benefit is determined by a formula linked to your FRA. This is when you can claim 100% of your earned benefit. You can apply for a retirement benefit from the age of 62, but if you apply before full retirement age, your benefit will be reduced by up to 6.7% per year. But filing after your FRA gives an 8% increase for every 12 months late, up to age 70.

The calculation is a little different with an FRA benefit suspension, as deferred credits are calculated from your already reduced benefits. But strategy can still be very valuable.

“That can add up to tens of thousands of dollars a year,” said William Meyer, co-founder of Social Security Solutions, which offers software aimed at helping retirees make optimal claims decisions. “It also creates a longevity hedge if you live longer than expected.”

Another warning about Social Security: If you have work and Social Security income before your FRA, your benefit is reduced by the retirement income test, which withholds one in two dollars in benefits beyond one. certain amount of wage income. This year, the test applies to income over $19,560. These advantages are not lost. When you reach full retirement age, Social Security recalculates your monthly benefit to credit you with the withheld benefits.

The Social Security Administration has published a calculator that you can use to determine any effect of the test on your benefits.


If you return to work after applying for Medicare at age 65, you may have the option of switching back to employer coverage — but do so with great caution.

Medicare requires you to enroll during an initial seven-month enrollment period that includes the three months before, the month of, and the three months after your 65th birthday. Failure to meet this window triggers late enrollment penalties levied in the form of higher bonuses that continue for life.

There is really only one important exception to these rules: you can delay enrollment if you are still working past age 65 and insured by your employer, or if you are insured by the employer of your spouse.

The late enrollment penalty for Part B is 10% of the standard Part B premium for every 12 months late. There are also late enrollment penalties for the Part D prescription drug program, although they are less onerous.

Opting out of Medicare could expose you to late penalties later when you re-enroll, so it’s very important to understand if your new employer’s insurance qualifies you for an exemption. You also run the risk of coverage delays when you return to Medicare, depending on when you enroll.

If your insurance comes from active employment, you can delay without risking penalties. But to ensure you have adequate coverage, you should not opt ​​out if you work for an organization with 20 or fewer employees. In these cases, Medicare becomes the primary payer at age 65, and you should be enrolled at that age to avoid large expenses.

Enrollment rules aside, also compare an employer-sponsored insurance option with Medicare to determine which is best for you — personally and financially. “It’s a very personal choice,” said Casey Schwarz, senior attorney at the Medicare Rights Center. “But I would start by comparing how much you pay in health insurance premiums and out-of-pocket expenses.”

If you have wage income and maybe Social Security, it’s easy to trigger Medicare Monthly Income-Related Adjustment Amounts (IRMAA). These are surcharges added to Medicare Part B and Part D premiums for enrollees whose income exceeds certain levels, which can significantly increase Medicare costs.

There are five mark-up brackets, defined by your modified adjusted gross income.

This year, the first bracket applies to individual filers with income over $91,000. Your monthly Part B premium would be $238.10 instead of $170.10. The Part D surcharge is smaller – $12.40 this year for registrants falling into the first bracket.


Returning to work paves the way for a resumption of late retirement savings. This year, you can contribute up to $27,000 to a 401(k) if you’re over 50; your IRA contribution limit is $7,000.

The opinions expressed here are those of the author, columnist for Reuters. (Written by Mark Miller Edited by Matthew Lewis)

Maria D. Ervin