Returning to work after you retire

For many healthcare and higher education professionals, retirement really means starting a new chapter. Here's how to make a post-retirement job work for you.

Sharon Sullivan of Sparta, New Jersey, spent 30 years as an ICU nurse before leaving the bedside and segueing into a career as a nurse consultant. At 68, she decided to "retire for real this time," and then a local college contacted her about teaching a class. "I thought, I can do this," recalls Sullivan, and before she knew it, 10 years and several classes had gone by.

The desire to return to work post-retirement is quite common—whether driven by the desire for busy days and a sense of purpose, or just that regular paycheck—and as of 2020, some 10.6 million people age 65 and older were still in the workforce, according to the U.S. Bureau of Labor and Statistics.

Of course, that landscape has changed somewhat since the onset of the pandemic: With so many industries—including healthcare and higher education—grappling with labor shortages and large numbers of people leaving or changing jobs, retirees wanting to dip their toes back into the workforce are now in considerably higher demand. Before diving in, ask yourself some key questions.

What kind of work do you want?
Returning to work doesn't have to mean going back to your old job. Think about how you'd like to fill your days. "I always made sure I could set my own hours and call the shots," Sullivan said of her post-retirement gigs. Deciding on the level of commitment you want is an important first step, says Rob Stevens, a Financial Planning Strategist at TIAA. "The salary and benefits might be nice, but you may have reached a point where you just don't want the stress, especially if it's a job you have to commute to," he says.

Consider how the skills you've honed over the years can translate to a new opportunity. Retired medical professionals, for instance, often find themselves transitioning to teaching roles, sharing their knowledge with the younger generation in their field. Other flexible opportunities include freelance healthcare writing—for trade or consumer publications or pharmaceutical companies, for instance—or (for less of a pivot), temp, part-time or travel healthcare positions. Educators often go on to work as adjunct professors at a college or university, find part-time positions at local cultural institutions or join the corporate world in training or consulting positions, just to name a few.

34% of retirees have considered returning to work because of opportunities created by the current labor shortage. -October 2021 survey, Resume Builder

What are the financial implications?
Accepting a job offer can bring some nice benefits, and also some red tape. So keep both in mind.

If you're a freelancer, you'll be considered self-employed, which means you may be subject to payroll taxes and may also have to pay estimated taxes throughout the year. Additionally, if you're earning income while also receiving retirement account distributions as well as Social Security benefits, you may actually put yourself in a higher tax bracket, says Stevens. "You have to ask yourself how this ties into your retirement strategy," he says.

These are good reasons to sit down and have a conversation with your financial advisor before making any commitments. You may find you can hold off on tapping into your retirement savings or taking your 403(b) or 401(k) distributions. And if you're 72 (the age where the IRS says you have to start receiving distributions) but are still working for the same employer, you won't be required to take the distributions from any retirement accounts tied to that specific employer.

Don't forget about Social Security: If you start receiving benefits and then pick up a new job, both before reaching Social Security's full retirement age (FRA), those benefits may be temporarily reduced thanks to something called the Retirement Earnings Test. "It's one of those nuances of Social Security that not everyone is aware of," says Daniel Ruppel, a Financial Planning Strategist at TIAA. Once you do fully retire, he adds, your monthly benefit will be recalculated to make up for the reduction. "It's not directly harmful in the long run, but if you're expecting a certain amount of money each month, it could come as a surprise," he says.

Finally, health benefits can be a big incentive to keep working, but remember that you'll need to be sure you're working enough hours to qualify for them, says Shelly Eweka, Senior Director of Financial Planning Strategy at TIAA. The Affordable Care Act defines this as 30 hours per week, for companies with more than 50 employees, but state laws vary, so find out what applies in your area.

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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor's own objectives and circumstances.

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Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.