Retirement Planning

Can I Retire at 55 and Still Work?

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Ever since the default retirement age of 65 was ended in 2011, the amount of people continuing to work into older age has drastically increased. This is largely driven by people reaching age 55 and deciding to opt for a phased or part-time retirement which they continue into their later years.

Maybe you thought you were retired but then realised you needed a little extra cash to make ends meet – or perhaps you’re just bored hanging around the home and decided to make a return to work.

But can you actually continue to work after retirement?

Yes, you can retire at 55 and continue to work. Many people choose to work part-time and lessen their hours. This is becoming increasingly common with people  who want to access their pension pot whilst continuing to work.

It’s great to be proud of your career achievements, and a little part-time employment may be pretty fulfilling once you retire. Additionally, it might make up for any shortage in income if you discover your pension income is lower than anticipated. If you’re looking for a part-time job, consider the following:

For example,

  • If you’re a teacher, you could retire and then return to work part-time or as a cover teacher.
  • If you’re a joiner, you could advertise in your local paper for odd jobs.
  • Another possibility is to donate your time to a non-profit organisation, such as a local hospice or charity.

There’s a few factors to consider if you intend to work more hours after you officially retire:

  • If you get means-tested benefits such as Pension Credit, Housing Benefit, or Council Tax Support, working beyond retirement may impact your eligibility.
  • If you continue to work and collect your State Pension and any private pension, you may be taxed more heavily.

 

Why do people continue to work after retirement?

People who work after retirement often remain more physical and socially active, which can mean better overall health and mental wellbeing.

Working part-time can give you a sense of being part of something without being tied to a career and long hours.

It’s also seen to be beneficial by many older workers, as it allows them to gradually ease into retirement while earning more than they would receive if they stopped work completely.

How many hours can you work after early retirement?

You can retire early and work as many hours as you wish. Alternatively, you can ask your company about working more flexibly or part-time hours. However, they are within their rights to say no.

Can I draw a pension and still work?

If you’re over 55, you can access your pension pot  and continue to work whilst doing so.

Many people choose access their pension lump sum, to free up cash for things such as a holiday, pay off a mortgage or debts. However, you will need to be aware potential tax rules around accessing your lump sum.

You can find out more information at ‘Can I take my pension and still work’.

Does working after retirement affect my pension?

Continuing to work – either full or part-time – after retirement may mean paying more tax on your pension withdrawals. This is because you may move above the income threshold, potentially a higher rate tax band.

You are likely to have more than one tax code issued by HMRC if you have:

  • Two or more jobs simultaneously
  • Income from a combination of two or more pensions
  • Pension and employment income

Therefore, retirees and those working over retirement age may have several tax codes; if this is the case, carefully check your codes to make sure you are paying the correct amount of tax.

If you are taxed at the basic rate (20%), you will be assigned a ‘BR’ code for your second employment or pension, which means that all income earned via their employment or pension will be taxed at the basic rate.

If you are taxed at a higher rate (40%) on your second employment or pension, you will be assigned a ‘D0’ code and will be taxed at a higher rate.

Do I still get a state pension if I continue working?

If you continue to work, your earnings will not affect the amount of state pension you get. However, your taxable income will grow as a result of the combination of earnings and pension.

So, if you work and pay taxes, your tax code will be adjusted to reflect earnings received from your pension. After you reach state pension age, you will be exempt from having to pay National Insurance Contributions (NICs).

Although we can generally access our personal pension from age 55, state pension rules are slightly different. In the United Kingdom, you can apply for a state pension when you reach the current state pension age. This is age 66 as of April 2021.

How much can I earn while claiming state pension In the UK?

The full new state pension gives you an annual income of £9,337.80. The personal allowance is £12,570, so you could earn up to £3,238 a year on top of claiming state pension before having to pay any tax.

Can I claim my 25% tax-free lump sum and continue to work?

Generally, If you’re over age 55, you can withdraw up to 25% of the value of any pension as a tax-free lump sum. Your Personal Allowance is unaffected by the tax-free lump amount. Tax is deducted from the leftover balance before you get it.

Can I be forced to retire by my employer?

Employers used to be able to force workers to retire at 65 (known as the Default Retirement Age). However, since 2011, there is no legal retirement age, and companies cannot force employees to retire at a specific age. When you decide to stop working is entirely up to you.

Need Help Planning what you need to spend?

If considering early retirement, it’s important to plan your spending. Joslin Rhodes are financial advisers who can help with forming a plan that suits you are life goals.

To get started on your journey to retirement, you can take our free no-obligation first meeting.

You’ll be able to speak with our financial advisers, who can explain our PlanHappy Lifestyle Financial Planning process, how it can help you, but most importantly, you can work through what it really is you want to do in retirement.

You tell us what you want to do, you tell us your goals and aspirations, and then we start your journey to retirement.

✓ Retirement Savings – how much you need to save for retirement

✓ Retirement Date – when you can afford to stop working

✓ Retirement Income – how much you can spend in retirement

So, if you’re looking to make sense of pension and retirement planning options with straightforward financial planning advice, we’re here to help.

Contact our friendly team on, 033 0133 3035 or click here to arrange a call back from one of our experts.

Joslin Rhodes Pension & Retirement Planning – Real Advice, For Real People

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