For many people, retiring from regular work is the ultimate goal. But for some retired people, “unretiring” can offer camaraderie, mental stimulation and a healthier bank account. If you’re retired and considering returning to work — or you’ve already found a new job — you’re not alone. A September 2021 survey by ResumeBuilder.com found more than one-third of retirees were considering returning to work, while 20% had been asked by their former employers to return. But before making the leap, you’ll want to understand how it can impact your Social Security benefits and Medicare coverage. 

Social Security. You can work during retirement and still receive Social Security benefits. But if you haven’t reached normal retirement age, which varies based on your date of birth, and you earn more than the annual earnings limit, your benefits will be reduced. 

Typically, your benefits will be cut by half of the amount that you exceed the limit. So, if you earn $29,560 in 2022, or $10,000 more than the annual retirement earnings test limit, Social Security will cut your benefits by $5,000. This calculation changes in the year you reach full retirement age. After you reach normal retirement age, your monthly benefit will be increased to account for the months in which benefits were withheld. 

In addition, your Social Security benefits may be taxed if your income is above a certain level. For instance, if you’re single, and one-half of your Social Security benefits plus your wages, pension and most other income tops $25,000, part of your benefits may be taxable.

Medicare. If you head back to work after you’re eligible for Medicare, should you keep it? Can you? The answers aren’t straightforward. 

Most people need to sign up for Medicare during the three months before they turn 65 and through the three months after. Miss this window and you may face ongoing penalties when you eventually enroll.

However, that can change if you have other qualifying or creditable insurance through your (or your spouse’s) employer. “Creditable” generally means the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage. 

If you decide to keep Medicare while working after age 65, note that coverage under Part A (hospital insurance) and Part B (generally, medical services) can vary with the size of the company. If your (or your spouse’s) employer has fewer than 20 employees, Medicare typically covers any services first, and your job-based insurance pays second. As a result, you’ll typically want to consider keeping Medicare coverage. On the other hand, if your employer has 20 or more employees, the company’s insurance typically pays first for coverage, with Medicare second. 

After you again stop working, you’ll typically have eight months to enroll in Medicare Part A and Part B. However, you’ll have only two months to enroll in Part C and D. (Part C, or Medicare Advantage, is a Medicare-approved alternative from a private company for Part A, Part B, and often Part D; Part D is drug coverage). Again, missing these deadlines can mean penalties.

If you have Medigap coverage and drop it, you may find it more difficult re-enroll later, especially if you have a pre-existing condition. As its name suggests, Medigap helps fill gaps in original Medicare. It’s sold by private companies. And if you enroll in your employer’s group health plan and it includes a health savings plan, you can’t contribute to the HSA if you remain on any part of Medicare.

Unretiring can make sense for many people. At the same time, it’s essential to understand how it might affect your Social Security benefits and Medicare coverage. Your accounting professional can help you determine this — and help you arrive at the best decision for you.