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Working Past 65 at American Electric Power: What Continuing Employment Means for Your 2026 Retirement Tax Strategy
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“In a changing regulatory environment, American Electric Power employees who continue working beyond traditional retirement age may benefit by working with qualified professionals to align their earned income, retirement timing, and long-term planning.” - Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.
“American Electric Power employees who extend their careers beyond traditional retirement age may be able to better navigate evolving rules by maintaining a holistic view of income timing, retirement account planning, and long-term financial priorities.” - Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
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Working beyond traditional retirement age.
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Key 2026 tax and retirement law changes affecting income and savings.
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Strategies for retirement planning, including required minimum distributions (RMDs), Roth contributions, and estate planning.
A growing number of professionals, including those at American Electric Power, are choosing to work well beyond the traditional retirement age. 1 Notably, financial need is not always the main driver. Employment often provides discipline, purpose, and social interaction, which leads many individuals to remain professionally active. However, additional tax planning considerations arise when continuing to generate income later in life, especially in light of recent legislative developments related to retirement, income, and estate planning.
The planning environment for individuals in their 60s and 70s has shifted due to recent legislative changes, including provisions under the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, as well as earlier laws like the Tax Cuts and Jobs Act (TCJA) and SECURE 2.0. For American Electric Power professionals, these updates may influence retirement contributions, income planning, charitable strategies, and estate planning decisions.
Understanding these changes may help align ongoing employment income with long-term retirement planning goals.
What You Should Know About the 2026 Tax Environment
Bracket Management Remains Important
Many American Electric Power employees who continue working into their 60s and 70s may find themselves in higher tax brackets than originally expected during earlier retirement planning years. Continued earned income may raise taxable income, especially when combined with Social Security benefits, consulting income, or investment withdrawals.
When planning for continued work at American Electric Power or elsewhere, bracket management—strategically controlling annual income recognition—remains an important consideration.
Roth Catch-Up Contributions for Higher Earners
Employees age 50 and older who earned more than $145,000 from the same employer in the prior year are required, starting in 2026, to make catch-up contributions to retirement plans as Roth (after-tax) contributions instead of pre-tax contributions.
Base elective deferral limits remain unchanged, with this rule applying only to catch-up contributions.
For individuals continuing employment later in their careers, this shift may influence tax planning and retirement savings strategy.
Super Catch-Up Contributions (Ages 60–63)
American Electric Power employees between ages 60 and 63 may qualify for enhanced catch-up contribution limits under SECURE 2.0.
For example, eligible individuals may be able to contribute up to $11,250 in 2026 above standard catch-up limits.
This expanded window provides additional opportunity to increase retirement savings during later working years.
Required Minimum Distribution (RMD) Timing
Under current law, required minimum distributions (RMDs) begin at age 73 for those born between 1951 and 1959.
American Electric Power employees who continue working before reaching RMD age may have additional flexibility to manage taxable income, evaluate Roth conversion strategies, and structure withdrawals. This flexibility can play a key role in long-term retirement tax planning.
Social Security Tax Thresholds
Depending on total income levels, up to 85% of Social Security benefits may become taxable. 2
For American Electric Power employees planning retirement income, coordinating earned income, retirement withdrawals, and other income sources may help manage overall tax exposure. Income coordination may support more consistent cash flow and tax management.
State Tax Considerations and Relocation
State income tax differences can significantly affect retirement income planning. For example, New Jersey has relatively higher top marginal income tax rates, while Florida does not impose a state income tax. 3
For American Electric Power employees considering relocation during retirement, these differences may influence after-tax income and long-term planning decisions.
Two Examples of Continuing to Work After Retirement
Example 1: Mei, 63
Mei, a former marketing executive with over 30 years of experience, transitioned into consulting after leaving full-time corporate employment. She now works part-time and earns approximately $185,000 annually. At 63, she falls within the SECURE 2.0 enhanced catch-up contribution age window.
This allows her to increase retirement savings beyond standard limits while still working. Her income also exceeds the $145,000 threshold that requires Roth catch-up contributions starting in 2026, influencing how she balances current tax obligations with long-term savings planning.
Mei’s continued consulting income also contributes to estate growth. With the federal estate exemption projected near $15 million per individual in 2026, she is evaluating multi-year gifting and charitable planning strategies.
Example 2: Robert (71) and Susan (65)
Robert and Susan, both former professionals, now earn approximately $60,000 annually through board stipends and consulting work. Their continued income allows them to reduce withdrawals from investment accounts while supplementing Social Security benefits.
Robert is approaching age 73, making RMD planning increasingly relevant. The couple is considering withdrawal timing strategies and Roth conversion opportunities prior to reaching mandatory distribution age.
They also relocated from New Jersey to Florida. The absence of state income tax in Florida compared to higher rates in New Jersey has improved their after-tax cash flow and overall retirement income efficiency.
The Big Picture: Strategy and Long-Term Planning
Many professionals, including those from American Electric Power, choose to work later in life by personal choice rather than necessity. While continued employment provides purpose and structure, it also introduces additional financial planning complexity.
Coordinating earned income, retirement contributions, estate planning, and withdrawal timing may help align long-term financial goals. Changes in retirement account rules, estate exemptions, and tax laws make ongoing planning more important.
How The Retirement Group Can Help American Electric Power Employees
Navigating retirement while continuing to work involves multiple considerations, including taxes, retirement accounts, estate planning, and income timing. The Retirement Group assists American Electric Power employees in reviewing these factors and aligning them with long-term financial objectives.
If you are continuing to work or considering working past traditional retirement age, speaking with a financial professional may help clarify available planning strategies. Support may include retirement income planning, tax-aware withdrawal strategies, contribution planning, and estate preparation.
You may reach The Retirement Group at (800) 900-5867 to learn more about retirement planning considerations.
This content is for informational purposes only and does not constitute legal, tax, or investment advice. Individuals should consult their financial advisor, CPA, or tax professional regarding their specific situation.
Sources:
1. Fortune. ' More Americans are working past age 65 ,' by Martha Boudreau. Apr. 26, 2024.
2. Internal Revenue Service. “ IRS reminds taxpayers their Social Security benefits may be taxable .' IRS Tax Tip 2022-22, Feb. 9, 2022.
3. Intuit TurboTax. ' States with the Lowest Income Taxes and Highest Income Taxes .' May 19, 2026.
How does the AEP System Retirement Savings Plan compare to other retirement plans offered by AEP, and what are the key features that employees should consider when deciding how to allocate their contributions? In particular, how might AEP employees maximize their benefits through the different contribution types available under the AEP System Retirement Savings Plan?
The AEP System Retirement Savings Plan (RSP) is a qualified 401(k) plan that allows employees to contribute up to 50% of their eligible compensation on a pre-tax, after-tax, or Roth 401(k) basis. AEP matches 100% of the first 1% and 70% of the next 5% of employee contributions, making it a valuable tool for maximizing retirement savings. Employees can select from 19 investment options and a self-directed brokerage account to tailor their portfolios. This plan compares favorably to other AEP retirement plans by offering flexibility in contributions and matching opportunities(KPCO_R_KPSC_1_72_Attach…).
What are the eligibility requirements for the AEP Supplemental Benefit Plan for AEP employees, and how does this plan provide benefits that exceed the limitations imposed by the IRS? AEP employees who are considering this plan need to understand how the plan's unique features may impact their retirement planning strategies.
The AEP Supplemental Benefit Plan is a nonqualified defined benefit plan designed for employees whose compensation exceeds IRS limits. It provides benefits beyond those offered under the AEP Retirement Plan by including additional years of service and incentive pay. This plan disregards IRS limits on annual compensation and benefits, allowing participants to receive higher benefits. Employees should consider how these enhanced features can significantly boost their retirement income when planning their strategies(KPCO_R_KPSC_1_72_Attach…).
Can you explain how the Incentive Compensation Deferral Plan functions for eligible AEP employees and what specific conditions need to be met for participating in this plan? Furthermore, AEP employees should be aware of the implications of deferring a portion of their compensation and how it affects their financial planning during retirement.
The AEP Incentive Compensation Deferral Plan allows eligible employees to defer up to 80% of their vested performance units. This plan does not offer matching contributions but provides investment options similar to those in the qualified RSP. Employees may not withdraw funds until termination of employment, though a single pre-2005 contribution withdrawal is permitted, subject to a 10% penalty. Employees need to consider how deferring compensation affects their cash flow and long-term retirement plans(KPCO_R_KPSC_1_72_Attach…).
How can AEP employees achieve their retirement savings goals through the other Voluntary Deferred Compensation Plans offered by AEP? In addressing this question, it would be essential to consider the specific benefits and potential drawbacks of these plans for AEP employees in terms of financial security during retirement.
AEP's other Voluntary Deferred Compensation Plans allow eligible participants to defer a portion of their salary and incentive compensation. These plans are unfunded and do not offer employer contributions, making them ideal for employees seeking additional tax-advantaged retirement savings. However, since they are not funded by the company, participants assume some risk, and the plans may not provide immediate financial security(KPCO_R_KPSC_1_72_Attach…).
What options are available for AEP employees to withdraw funds from their accounts under the AEP System Retirement Plan, and how do these options compare to those offered by the AEP System Retirement Savings Plan? AEP employees need to be informed about these withdrawal options to make effective plans for their post-retirement needs.
Under the AEP System Retirement Plan, employees can access their funds upon retirement or termination, with options including lump-sum payments or annuities. The AEP System Retirement Savings Plan offers more flexibility with in-service withdrawals and various distribution options. Employees should carefully compare these withdrawal choices to align with their retirement needs and tax considerations(KPCO_R_KPSC_1_72_Attach…).
In what scenarios might AEP employees benefit from being grandfathered into their retirement plans, and how does this affect their retirement benefits? A comprehensive understanding of the implications of being grandfathered can provide significant advantages for eligible AEP employees as they prepare for retirement.
AEP employees grandfathered into older retirement plans, such as those employed before 12/31/2000, benefit from higher retirement payouts under previous pension formulas. This offers a significant advantage, as employees can receive more favorable terms compared to newer cash balance formulas. Understanding these grandfathered benefits can help eligible employees plan for a more secure retirement(KPCO_R_KPSC_1_72_Attach…).
How can AEP employees take advantage of the matching contributions offered under the AEP System Retirement Savings Plan and what strategies can be implemented to maximize these benefits? Understanding the contribution limits and matching algorithms of AEP is crucial for employees aiming to enhance their retirement savings.
AEP employees can maximize matching contributions under the AEP System Retirement Savings Plan by contributing at least 6% of their compensation, receiving a 100% match on the first 1% and 70% on the next 5%. To enhance savings, employees should ensure they are contributing enough to take full advantage of the company's match, effectively doubling a portion of their contributions(KPCO_R_KPSC_1_72_Attach…).
What are the key considerations for AEP employees regarding the investment options available in the AEP System Retirement Savings Plan, and how can they tailor their portfolios to align with their long-term financial goals? Employees should be equipped with the knowledge to make informed investment decisions that influence their retirement outcomes.
The AEP System Retirement Savings Plan offers 19 investment options and a self-directed brokerage account, providing employees with a variety of choices to build their portfolios. Employees should evaluate these options based on their risk tolerance and long-term financial goals, aligning their investments with their retirement timeline and desired outcomes(KPCO_R_KPSC_1_72_Attach…).
As AEP transitions into more complex retirement options, what resources are available for employees seeking additional assistance with their benefits, particularly regarding the complexities of the AEP Supplemental Retirement Savings Plan? It’s essential for AEP employees to know where and how to obtain accurate support for navigating their retirement plans.
As AEP introduces more complex retirement options, employees can access resources such as financial advisors, internal retirement planning tools, and educational webinars to navigate their benefits. Understanding these resources can help employees make informed decisions, particularly when dealing with the intricacies of the AEP Supplemental Retirement Savings Plan(KPCO_R_KPSC_1_72_Attach…).
How can AEP employees contact the company for more information regarding their retirement benefits and plans? Knowing the right channels for communication is important for AEP employees to gain clarity and guidance on their retirement options and to address any specific inquiries or uncertainties they may have about their benefits.
AEP employees can contact the company’s HR department or use online portals to access information about their retirement benefits and plans. Timely communication through these channels ensures employees receive support and clarity regarding any concerns or inquiries related to their retirement options(KPCO_R_KPSC_1_72_Attach…).
For more information you can reach the plan administrator for American Electric Power at 7 longs peak dr Broomfield, CO 80021; or by calling them at 1-303-939-6100.
https://aep.com/investors/financialreportsandreleases/AnnualReportsProxies/AEP_AnnualReport_2022.pdf - Page 42 https://aep.com/investors/financialreportsandreleases/AnnualReportsProxies/AEP_AnnualReport_2023.pdf - Page 39 https://aep.com/about/businesses/AEP_PensionPlan2024.pdf - Page 23 https://aep.com/about/businesses/AEP_401kPlan2023.pdf - Page 17 https://aep.com/about/businesses/AEP_RSUs2022.pdf - Page 14 https://aep.com/about/businesses/AEP_HealthcareOptions2024.pdf - Page 11 https://aep.com/about/businesses/AEP_StockOptions2023.pdf - Page 19 https://aep.com/about/businesses/AEP_AnnualReport2022.pdf - Page 28 https://aep.com/about/businesses/AEP_EmployeeHandbook2023.pdf - Page 32 https://aep.com/about/businesses/AEP_AnnualReport2024.pdf - Page 21
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