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How to Plan for Part-Time Retirement


You might imagine retirement as the last day you go into the office, but what if it meant spending more time in your home office? Part-time retirement means remaining in the workforce in a limited capacity, usually for extra income or to follow your passions through work. Instead of continuing in the full-time grind, part-time retirement provides balance and possibilities for retirees wanting to stay busy. Part-time or phased retirement could be a good fit for older employees. If you’re interested in planning for part-time retirement then you may want to discuss your options with a financial advisor

What Is Part-Time Retirement?

Part-time retirement means that instead of leaving the workforce altogether, a person of retirement age transitions from working full-time to spending reduced hours working how they prefer. A part-time job, consulting gigs and passion projects provide moderate work hours while giving you more time and flexibility.

The goal of part-time retirement is to perform meaningful work for less time than a typical career requires. In return, the semi-retiree receives a host of benefits. For example, continuing to earn money helps defray retirement costs, which is crucial for the rising cost of living and extended lifespans of retirees due to modern medicine.

In addition, part-time retirement promotes a dynamic lifestyle that counteracts the potential monotony of retirement. Instead of getting stuck in a rut of reading the paper and playing yet another round of golf, you can engage in exciting work while still having time for yourself. Plus, while your career may have given you financial stability for the past several decades, it might not have matched your passions. Part-time retirement is an opportunity to get into the work you love.

Steps to Prepare for Part-Time Retirement

SmartAsset: How to Plan for Part-Time Retirement

As with full retirement, it’s vital to prepare for part-time retirement. The following steps can help you successfully enter your next chapter:

1. Set a Budget

Retirees of all stripes have financial needs and potential income streams. Fortunately, semi-retirement provides an additional income source to supplement Social Security, individual retirement accounts (IRAs) and other assets. That said, retirement is only viable if you can offset your monthly expenses with income.

Take a few minutes and map out your financial standing. You can answer the following questions to help focus your thoughts:

  • How much money will you have coming in and going out during retirement?
  • How much will you need from part-time work to make ends meet?
  • Are there debts and unnecessary monthly expenses you can rid yourself of to simplify your budget?

Also, it’s icing on the cake if you can pay off your mortgage before retiring. You’ll make generous room in your budget and secure your housing for good.

2. Understand Your Assets

Delaying Social Security distributions and withdrawals from your IRA or 401(k) can increase your financial stability. This factor makes part-time retirement advantageous because it can help you maximize income and avoid draining assets midway through retirement.

For example, if your semi-retirement work helps you postpone taking Social Security until you’re 70, you’ll receive the highest amount possible. In addition, you can continue contributing to your IRA with income from a part-time job. As a result, how you handle your assets is essential to making a viable financial plan.

3. Define Your Goals

Creating a vision for the future will help part-time retirement be your next great adventure. Retirement is the time you’ve earned, so set your sights high. For instance, you could turn a woodworking hobby into a profitable business or prioritize serving others. If you love your current job, ask your employer if they’re willing to transition you to a part-time position (if you can keep your benefits, that’s another perk).

On the other hand, if working provides needed structure but you want to eliminate as much stress as possible, there’s nothing wrong with bagging groceries for a few days per week and earning the extra paycheck. The point is to let your values and ambitions guide you.

4. Buy Health Insurance

Healthcare costs will comprise a significant amount of your budget (if you don’t have a mortgage, it may be the biggest item). Health insurance is expensive, especially if you retire before age 65 when you receive Medicare.

Until then, you have several options. If your spouse works full-time, they might be able to add you to their employer-sponsored insurance. In addition, leaving your job may qualify you for COBRA, which allows you to stay on your former employer’s insurance plan for 18 months at an increased price. Or, a new part-time job might include health benefits. Lastly, you can purchase a health insurance policy from the Health Insurance Marketplace until you age into Medicare.

Does Part-Time Retirement Make Sense for You?

Part-time retirement is excellent for those looking to transition to the workforce while addressing financial needs through limited work. However, part-time retirement isn’t solely about making money. The opportunity you pursue in semi-retirement is also about finding meaning in the next stage of life and avoiding stagnation. While it’s possible to have a vibrant, exciting life in full retirement, part-time retirement can provide an ideal balance between work, play and rest.

For example, if you’re a retiring teacher, part-time tutoring is an excellent way to keep your skills sharp, create social relationships and follow your passion. Plus, you’ll make extra money and contribute to students’ lives.

Or, let’s say you want to retire but have no source of health insurance. You can obtain health insurance through a part-time job at a company like Lowes, Staples or Starbucks. As a result, part-time retirement would consist of 20 or so hours per week working with the rest of your time to yourself.

The Bottom Line

SmartAsset: How to Plan for Part-Time Retirement

Part-time retirement can provide everything retirees want, from supplemental income and health insurance to excitement and meaningful work. It can be a great way to be sociable and stay active during retirement or help you continue to pursue a passion of yours. If you’re considering part-time retirement, it’s crucial to organize your finances, set goals and choose work that fits your wants and needs.

Tips for Part-Time Retirement

  • Part-time retirement is as financially complex as full retirement. Income distributions, tax brackets and healthcare costs all come into play. A financial advisor can help you create a financial plan to ensure you can afford retirement amidst market volatility and other financial challenges. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goalsget started now.
  • Retirement can be a time of change, including financially savvy relocation. Part-time retirement may be the opportunity to find a tax-advantaged place to live. Here are the best states to retire for taxes.

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