Maybe you’ve found the perfect buyer for your business, or you’re ready to put an end to your corporate career and spend more time with family. In either scenario, you don’t have to choose between full-time work and full-time retirement. You can also decide to consult in your field or even pursue a part-time position.
If part-time work during retirement appeals to you, there are important factors you should consider before reaching out to professional contacts about open positions. The choice of working during retirement impacts your financial life as well as your social and emotional wellbeing, so weigh the following benefits and considerations before making your decision.
Benefit: Employment Income Reduces Reliance on Investment Income
When supplementing other sources with part-time employment income, you can reduce your reliance on withdrawals from retirement accounts. Smaller withdrawals leave more of your savings invested and increase the opportunity for compound returns.
By giving your savings more time to work, you gain the opportunity for your investments to grow. Higher account balances can generate more income throughout the rest of your life and even provide more assets to leave for heirs.
Benefit: Part-Time Work May Provide Health Insurance for Early Retirees
One of the main barriers to early retirement is the cost of healthcare. Medicare is available for most Americans beginning at age 65, but people who retire before that age often rely on private health insurance. Unfortunately, private insurance can cost over $1,000 per month for a 60 year old, and this additional expense can quickly derail your retirement plan.
Over a quarter of part-time jobs offer health insurance, and the average employer contributes 80% toward the cost of premiums for individual coverage. If you can land a job that offers health insurance, you could greatly reduce your monthly expenses when retiring before Medicare age. This coverage could even make early retirement possible when it was otherwise cost-prohibitive.
Benefit: Extra Income Could Allow You to Delay Social Security Benefits
Social Security benefits are available beginning at age 62, but are reduced if you claim them before your Full Retirement Age [FRA]. Part-time work can generate enough income to replace Social Security when retiring before your FRA and allow you to delay claiming until you can get your full benefit amount.
Further, Social Security benefits are increased for each month you delay claiming them past your FRA up until age 70. If you continue to work part-time until that date, you can delay benefits and claim a higher monthly benefit throughout the remainder of your life.
Consideration: Earned Income Could Subject You to the Social Security Earnings Test
If you choose to claim Social Security benefits early, part-time work could cause a reduction in your monthly benefit due to the earnings test. This provision applies to people who claim benefits before reaching FRA and continue to work.
The earnings test includes two thresholds and withholds a certain amount of benefits based on your age and income. The first threshold applies if you will not reach FRA in the current year and withholds $1 of benefits for every $2 you earn above $23,400. The second threshold applies if you will reach FRA in the current year and withholds $1 of benefits for every $3 you earn over $62,160. These thresholds apply for 2025 and are indexed each year for inflation.
Fortunately, benefits that are withheld due to the earnings test are not lost forever. Instead, they are repaid to you over the course of your life once you reach FRA. However, it could take decades to recoup the withheld amount, and the loss of income during the early years of retirement could require significant changes to your financial plan.
Benefit: Part-Time Work Can Be Socially and Emotionally Rewarding
Outside of the financial implications, part-time work can have emotional and social rewards. Studies have shown that boredom is associated with physical and psychological changes, and that avoiding boredom was one of the most important factors to healthy aging. Part-time work – especially in a field you enjoy – can keep you engaged with life and provide a sense of purpose.
In addition to alleviating boredom, part-time work can be a great way to make new friends and stay connected with people in your community. It can also allow you to use skills you developed throughout your career and even share them with others.
Consideration: Work Generates Stress and Takes Time Away from Other Activities
While part-time work can be rewarding, it also has the potential to recreate the stresses that made you want to retire in the first place. Schedules can be constraining, and work may require more mental capital than you are content providing.
To minimize stress in your work, consider a job with flexible hours in a field you enjoy. This type of employment can provide the fulfillment and income you seek while still leaving time for family and hobbies.
Overall, working part-time during retirement can give you a leg up financially and socially, but can also reduce your leisure and family time. To help weigh the pros and cons of taking a job after retirement, work with an experienced financial advisor to evaluate your specific situation.
Decide If Working During Retirement Is Right for You with Guidance from Meld
At Meld Financial, we can help you determine if working part-time fits into your retirement plan. Our team can help you weigh the benefits of continued employment and consider the trade-offs for your finances and lifestyle.
Retirement planning is at the heart of our comprehensive financial program, Financial Fingerprint®. With this nimble plan, you can understand your current financial position and the steps needed to turn your goals into reality. Best of all, it is easily digestible with everyday language that avoids complex jargon.
To learn more about Financial Fingerprint® or discuss your personal situation, contact a member of our team today.
