ROCHESTER, N.Y. (WROC) — CPA Scott Adair discussed the tax implications of going back to work in retirement Monday during News 8 at Sunrise.
“There are a couple things you need to be thinking about as far as benefits and taxes go – benefits regarding Social Security, healthcare, retirement accounts, and then ultimately that zinger that’s out there is income taxes,” said Adair. “If you’re 62 or over, and you’re going back into the workforce, you need to reach out to the Social Security Administration to consider what the implications are of having that additional income because it certainly could generate additional taxes for you as you go to file that subsequent year’s tax return.”
Adair explained that in Social Security environment, 65-67 is that full benefit age at this point in time, depending on the date of birth for the individual but that 62 is when you can start to take a reduced benefit from the SSA. “It’s a good time to pull out your prior year tax return, take a look, maybe even contact your CPA from that perspective and take look to see where the income tax brackets fall because you may wind up tripping yourself into a higher tax bracket where there is no economic benefit to going back to work at that point.”
Adair said one of the things you want to look at – especially if you’re 65 or older and you’re on Medicare already – you may want to take a look at the employer provided benefit that you’re going back to. Compare the two to determine what is in the best interest of you and your family.
He said the same applies to private health insurance. “Compare that to the benefits provided by the employer. Again, there may or may not be some reasons to stick with the private insurance or there may be reasons to go with the employer sponsored plan. It could be cheaper, but it may implicate you later on as far as getting back into the health care environment when you are officially retired.”
Retirement accounts are a consideration as well, especially if you are going back to work for the employer which is providing the benefit. “Make sure you sit down and talk with them to figure out what the ins and outs are of their retirement plan and any other retirement accounts that you have out there,” Adair advised. “Talk with your CPA. Talk with your financial adviser to make sure you’re making the right choices.”
You can also visit the Social Security Administration website to learn more.
For more “Smart Money” advice visit the New York State Society of CPAs website.