What Is Semi-Retirement and How Do You Do It?

The traditional vision of retirement as a time when people stop working completely has expanded in recent years to include the concept of semi-retirement. This is a transition stage to full retirement during which people usually work fewer hours, either at their former employers or in a new part-time job. Semi-retirement can generate additional income while also providing engagement, satisfaction and even better mental and physical health. However, it can also come with challenges, chiefly relating to health insurance. Talk to a financial advisor to get help with your overall retirement planning who can help you with understanding when and how to retire right for your situation.

Self-Retirement Basics and Background

Semi-retirement is a period of time during which a person stops working full-time in their previous career and begins working fewer hours or, perhaps, putting regular workweeks at some money-earning pursuit that they find more enjoyable and rewarding. Deciding to semi-retire is distinct from deciding to continue working a conventional schedule at the same as long as possible even after retirement age.

Semi-retirement was long discouraged by federal policy that reduced Social Security benefits when recipients earned money from working. However, changes to the earnings limit rule meant that after reaching full retirement age recipients could earn any amount of income from working without reducing their benefits. As a result, semi-retirement is more attractive. Today, nearly six in 10 (58%) of workers plan to work at least part-time in retirement, according to the 2022 Transamerica Retirement Survey.

Types of Semi-Retirement

Semi-retirement can come in a number of different guises, including working fewer hours for the same employer, taking a new part-time job and starting a business. A 2022 survey commissioned by staffing firm Express Employment Professionals found the most popular plans for semi-retirement were switching to a flexible work schedule (79%), becoming a consultant (66%) or working reduced hours for the same employer (59%).

Each option offers benefits and drawbacks. Working fewer hours, remotely or with a flexible schedule for the same employer is likely to let someone earn a higher hourly wage than they could at a new job. But semi-retirement is offered by few employers – 21%, according to the Express Employment survey.

A part-time or seasonal job can give flexibility and the opportunity to learn a new skill or pursue a personal interest in semi-retirement. But part-time work is likely to pay less and may provide no benefits at all.

Starting a business in semi-retirement can be gratifying, but hours may be long and it may be difficult to get a new company off the ground without taking on debt. Consulting can be another way to go, with the opportunity to earn a higher hourly rate without having to invest in a startup.

Benefits of Semi-Retirement

Earning more income is one of the largest benefits of semi-retirement. People preparing to retire without a pension or sizable personal savings may be uncertain whether Social Security benefits will be adequate to maintain an acceptable lifestyle. Semi-retirement can provide helpful additional income to cover living expenses. Retirees who have some pension and personal savings can use semi-retirement to delay taking Social Security benefits, producing a higher monthly benefit.

Working after retirement also supplies people with social engagement that could be lacking if they stopped working completely. Remaining active in this fashion can benefit cognitive and physical health more than complete leisure.

Challenges of Semi-Retirement

For people who retire before they qualify for Social Security or pensions, taking semi-retirement can mean having significantly less income. That’s the biggest obstacle to semi-retirement for many workers.

Health insurance during semi-retirement is also a likely issue. Someone who received health insurance through an employer may lose that benefit by switching to part-time employment, either at the same company or a new one. If the person isn’t old enough to qualify for Medicare at age 65, he or she will likely have to pay for COBRA benefits or coverage purchased through the Affordable Care Act’s Health Insurance Marketplace or on the private market.

The Bottom Line

Semi-retirement involves working fewer hours, working remotely or with a more flexible schedule during a period of transition to full retirement. Semi-retirement can provide value-added income, satisfaction and engagement while also giving someone more leisure than they had during the bulk of their working years. Challenges to semi-retirement include obtaining health insurance and finding an employer that will accommodate it.

Tips for Retirement Planning

If you’re considering semi-retirement, talk to a financial advisor about creating a pre- and post-retirement budget, paying down debt, funding emergency savings and planning for healthcare costs. Finding a qualified financial advisor doesn’t have to be hard. 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 goals, get started now.
Social Security remains the most important retirement benefit for most people. In 2022, if you wait until age 70 to begin taking Social Security, the maximum benefit is $4,194 per month or $50,328 a year. You can increase your maximum benefit by earning more while working.