Reports that many of those who retired following the pandemic’s onset are re-entering the nation’s workforce don’t surprise Brandy Marion.
Whether people left a physically demanding job in the high-stress service industry or stepped away from a management role as the economy shut down, present-day realities are causing many to reconsider.
“What I’m hearing from my clients is that lower-skilled workers are returning to work because they need the money to deal with higher inflation,” said Marion, institutional wealth education and training manager at BOK Financial®. “As for higher skilled workers, I believe many are probably panicking right now because their 401(k) plan balances were probably near an all-time high on December 31, 2021, but have simply been hammered through the first part of 2022.”
So, just as the Great Resignation dominated workplace conversations during 2021, “unretirement” is having a moment in 2022. According to U.S. Census Bureau data reported in The Washington Post, the percentage of retirees returning to the workplace is back at pre-pandemic levels, enticed by higher salaries, flexible working conditions and other incentives amid a tight labor market.
While conditions are seemingly ideal for many to put retirement on the back burner, Marion, who regularly conducts retirement seminars, strongly encourages considering the implications of the quick switches.
“Too often, employees simply get information from their coworkers, who may or may not know all the rules, which can complicate what’s already confusing,” she said.
One path back to employment is returning to your former employer. So-called boomerang workers are valued for existing knowledge of the company, its culture and product.
If you’re returning to your old stomping grounds, Marion encourages you to ask:
- Are you immediately eligible for all benefits?
- Is previous service recognized for 401(k) plan vesting purposes or does your service time reset to zero?
- Can you stop or suspend the distributions you started taking from the 401(k) plan?
Alternatively, if you’re pursuing a new opportunity, tailor your questions to your situation.
For example, if you plan on retiring—for good—in the next three to five years, your approach to retirement savings will likely be different than it has been over the last few decades. To find the best way forward, Marion suggests asking:
- What’s the vesting schedule for the employer match on the 401(k) plan?
- Does the retirement savings plan allow for catch-up contributions?
- Is there a 401(k) Roth option?
Perhaps most importantly, determine how the company’s healthcare benefits can cover you until you turn 65, when Medicare kicks in.
Weighing Social Security and Medicare considerations
One benefit of years of private sector work is that the Social Security system will provide a monthly payment if you retire after age 62—the older you are, the bigger the checks are—and an invitation into the Medicare health insurance system after age 65.
That still holds true even if your first stab at retirement is ending quicker than anticipated.
“You have one do-over on Social Security, and you can suspend your Medicare benefits, but there are conditions on both,” Marion said.
For Social Security, if you’ve passed full retirement age and started claiming the monthly benefit, you can suspend those payments when you return to the workforce. That locks you in at close to present-day payment levels once you retire for good. Or, you can re-set your retirement clock by paying back the benefits within 12 months of receiving them.
Marion is quick to caution recipients that federal calculations are based on tax year data, so benefits may change dramatically after the Social Security Administration runs the numbers. Overall, receiving Social Security benefits doesn’t prohibit you from working, but if you’re younger than full retirement age, your monthly benefit will be reduced if your wages exceed $19,560.
Medicare details also vary, as fully employed individuals may receive Plan A benefits, which serve as secondary hospitalization coverage, as soon as they turn 65—unless they contribute to a health savings account. Plan B benefits, which require a premium and pay for doctors’ care and services, are suspended once a recipient re-enrolls in an employers’ healthcare plan.
And yes, any Plan B premiums that were covered by a Social Security benefit that you’re looking to pay back must be returned as well.
“For many who retired, I think going back to work is more about healthcare benefits than it is for retirement benefits, so it’s definitely something to pay close attention to,” Marion said.
Outside of the impact on household finances, Marion also sees intangible influences on the shift from leaving the ranks of the recently retired to returning to the workday world.
“People gripe and moan about going to the office, but those are our friends—people we commiserate with and we celebrate milestones with,” she said. “Our jobs keep us mentally sharp.”