Ulterior Motives for Going Back to Work after “Early Retirement”
There are other reasons to go back to work after retiring… other than your “other half” might just kill you if they have to be around you ALL the time.
Some Background: To begin with I retired at 48… considered young to do so… more burned out really… I went from 90 plus hour workweeks to zero in one day. I spent four months around the house catching up on some reading and other things and slowly going stir-crazy… Soooooo…
I went back to work… though this time I’m NOT one of the Bosses (and have declined offers to become part of management at my new employer… the first time two weeks after I hired on). Alleviating stir-craziness was not the only reason for returning to work though… there are three other reasons:
1. First they have Health Insurance that is fairly reasonable in price and is pretty good. While I’m generally healthy I don’t like the idea of taking the chance of sometime in the next 14 years before I’m eligible for Medicare or a medical problem bankrupting me.
2. Second I want to keep contributing to my Roth IRA… and I CAN’T unless I have a job. The rules for IRA’s say you can only contribute $5,000 ($6,000 in my case since I’m now over 50 and allowed an extra $1,000 in “catch up”) or the total of your “earned income” whichever is less. And the politicos decided that anything other than “wages” from a job are “UN-earned income” so they are not eligible to go into IRA’s.
Since my “Retirement Income” is generated by interest, dividends, and capital gains I had to go back to work or lose the ability to keep contributing.
3. It gives me Pocket Money… and with the current financial crisis and severe (albeit temporary IMO) drop in the stock markets I can sit back and wait for the recovery relying on my job income to pay what few bills I do have.
Photo credit: stock.xchng.
I think you’re defining “earned income” a bit too narrowly. Practically any income other than investment income counts. Self-employment income of any kind counts–consulting, writing, selling crafts, etc. Gathering aluminum cans and recycling them would count, as long as you declare the income on a Schedule C and pay taxes on it.
Hello Philip,
You are correct in all the things you cite as being earned income as long as you pay taxes on them.
Perhaps a more proper definition of “Earned Income” would be “any income on which Social Security Taxes have been paid”.
As of yet Interest, Dividends, and Capital Gains for Individuals are not subject to Social Security Taxes, just Income/Capital Gains Taxes…though I wonder how long this state of affairs will last with Social Securitys deficit problems.
~ Roland
so to be clear, you can take a job as long as it takes to earn $5k, which you can then put into your IRA? Or are there some percentage of income rules there?
Hi Ch,
The rule is up to $5000 OR your earned income, whichever is LESS.
And if you are over 50 you get an additional $1000 “catch up” allowance so then its $6000 or your earned income, whichever is Less.
Percentages apply on 401(k)’s and SEP’s but not on IRA’s.
You can work until you earn $5000 and put every penney into an IRA.
~ Roland