If I Retire and Begin Receiving My Pension, Can I Still Work?
By Amy Vandervort-Clark, J.D. | Legally reviewed by Melissa Bender, Esq. | Last reviewed April 28, 2024
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On your last day, you thought you were retiring for good. You begin receiving retirement benefits but realize you need a little more money to cover health care premiums, meet the increased cost of living, and make ends meet. Perhaps you enjoy working and wish to try out a new role. It happens all the time. But you can't afford to lose your pension while you're back at work, particularly if it's a lower-wage, part-time job. What should you do? Can you work and collect your pension at the same time?
It's common for a recently retired person to seek reemployment with a former employer who provides the employee with a pension. It's important to review your pension plan, as plans can differ from employer to employer. Your decision to return to work could negatively impact your pension.
So, can you return to work and still collect your pension payments?
In most cases, the answer is yes. You may still work while receiving a pension and Social Security benefits but with a few limitations. Since pensions are a part of your employee compensation package, they generally can't face elimination. Some pensions change due to the rise and fall of the stock market, so it's not uncommon for a retiree to continue working after retirement to supplement a weaker-than-expected monthly check.
What Is a Pension?
A pension is a retirement account you earn as a benefit of your employment with specific employers. Generally, an employer invests money into a pool of funds the employee draws from after retirement. The employee isn't required to make contributions.
Pensions are usually defined benefit plans. Your payment options upon retirement depend on your age, length of employment, and salary history.
Pensions are waning in popularity as organizations move to less expensive alternatives such as defined-contribution plans. Defined contribution plans are employer-sponsored retirement accounts, like 401(k) or 403(b) plans, where the employer matches a worker's pretax contributions to a certain percentage. You save some income tax upfront since the money gets deducted before you're taxed. You will pay the Internal Revenue Service (IRS) taxes once you receive your retirement income.
For additional information, see:
Who You Work for Matters
Pension plans are becoming harder to find. The U.S. Department of Labor reported that only 15% of private employers provided pension plans in 2023.
Pensions are generally available to union members, such as autoworkers, teachers, law enforcement, and other civil service employees. State and federal employees also participate in a pension plan. Military service members are eligible for a pension, typically after 20 years of military service.
It's common for a recently retired person to seek reemployment with a former employer who provided the employee with a pension. It's important to review your pension plan. Plans can differ from employer to employer, and your decision concerning your return to work could negatively impact your pension.
As you consider returning to work, also note that some companies offer lump-sum pension payments instead of a monthly check, which may be helpful under certain circumstances. Otherwise, you will want to calculate your monthly expenses to figure out your monthly benefit check before deciding whether to work while receiving a pension.
State Employees
Each state operates a retirement system for state employees. These retirement systems often determine your benefit amount based on years of service and age. Generally, you need to maintain employment for a specific length of time, called a service requirement, usually a minimum of five years, before you are eligible to retire with benefits.
Some states will not allow you to return to work at your old job for a specific period of time from your date of retirement. This break in service may be as little as 30 days or three to six months or more. Returning before this time will likely stop your pension or retirement payments until you retire again.
Federal Employees
The Federal Employees Retirement System (FERS) administers pension benefits for federal employees. If you retire but return to work in a position covered by the FERS, the agency can reduce your pay by the amount of your pension payments. However, if you retired due to disability or because your position was eliminated, you may lose your pension by returning to FERS-covered employment.
Private Employer Pensions
Review your employer's pension plan carefully and meet with an adviser if you have questions. Often, if you work for your former employer on a full-time equivalent (FTE) basis, your annuity or pension payments may stop. It may be best to work part time because many part-time/independent contractor positions will not affect your pension. Also, whether you return to work may affect planned increases in your payments when you retire.
But it's also possible to work full time after a service retirement and still collect a pension if your full-time work is with an employer that doesn't use the same retirement system.
A company looking to downsize may offer early retirement incentives while employees still have several years of work left in their careers. And no matter how much you earn from another job, your original pension payments are fixed. The pension administrator cannot lower the payment.
Can Returning To Work Affect Your Social Security Benefits?
Yes. Going back to work can affect your Social Security benefits.
The federal government manages Social Security benefits through the Social Security Administration (SSA). Social Security retirement is a monthly payment that replaces some of your income once you retire. During your working life, you pay into Social Security unless you are an independent contractor. The SSA reviews your age and income when determining if it will reduce your benefit payments.
If you are collecting Social Security but have not yet reached full retirement age, the SSA can reduce your payment if you earn more than a certain amount annually. However, after reaching full retirement age, there is no such limit on earnings.
If you are younger than the retirement age and are making more than the limit, the SSA can reduce your benefits. If you are under retirement age, SSA will deduct $1 for every $2 you make over the annual earnings limit. In 2024, this limit was set at $22,320. However, the administration does not count pension benefits when determining how much you make monthly or annually.
Disability Retirees
If you receive Social Security disability retirement benefits, you can return to work and maintain those payments under certain circumstances. You must generally complete a nine-month trial period. In 2023, you must earn less than $1,550 per month, or $2,590 if you're disabled due to blindness, to keep your disability benefits and Medicare coverage.
Should you receive a pension after retiring due to a disability, you may have to seek approval to return to work and keep getting those payments. There are often various requirements you must meet. Your pension office may require you to hold a new position, not your previous job, with duties your disability restricted you from performing. You may also be subject to earning limitations. Review your company's policies and meet with an adviser before you begin working again.
Get Legal Help With Your Pension Questions
Being prepared for retirement is a big deal. You worked hard all your life, and now the last thing you want to do is worry about paying rent or putting food on the table. If you have questions about collecting your pension while returning to work, speak with an experienced employment attorney near you today.
Next Steps
Contact a qualified employment attorney to make sure your rights are protected.