For many people, being semi-retired is preferable to being fully retired. Reasons vary from the oft-cited need for supplemental income to just wanting to remain busy. Whatever the explanation, a significant number of retirees plan to work part-time after they retire.

In fact, according to a survey by United Income called Older Americans in the Workforce, more than 20% of people over the age of 65 are working or looking for work as of February 2019. College-educated adults are the fastest-growing segment of that group, 53%—up from 25% in 1985. The survey credits these figures in part to improved health. A 2016 Pew Charitable Trust survey found that 66% of respondents planned to work past 65.

Key Takeaways

  • People might work in retirement both because they have to and because they want to.
  • Employment options include becoming a consultant, starting a new business, getting a part-time job, or working from home via the internet.
  • There can be income tax and Social Security complications if your income is high enough.

Why People Choose a Semi-Retired Life

One of the most often named reasons for people working at least part-time after retirement is financial need. The elimination of most defined-benefit pensions is one reason for that. Workers with Social Security as their only retirement income often feel they have no choice but to get a part-time job.

That said, according to the Pew Charitable Trust survey, 31% of retired women and 40% of men said they worked part-time because they wanted to do so. For some, the desire to get a part-time job is about not wanting to vegetate. As the Older Americans in the Workforce survey indicated, longer life expectancies have brought about what some call a reimagining of later life that concentrates more on being active than on relaxing and taking it easy.

More than 20% of people over the age of 65 are working or looking for work as of February 2019.

Others use retirement as an opportunity to start their own business. For many, the idea of a new career based on an interest, a passion, or a hobby is a strong motivator. “After a lifetime of hard work and the stress of the daily grind, retirement can be a daunting concept, even for those fortunate folks with substantial savings and wealth,” says Tim Golas, partner, Spurstone Executive Wealth Solutions. “How they will invest their time and continue to have meaning in their lives is a real and emotional challenge after they have often defined their value through their career and their work.”

The Older Americans in the Workforce survey revealed that 77% of respondents said their health was so good that there were “no limitations in the kind of work they can do,” up from 71% in 1997. “Working into retirement or opting for semi-retirement can be great for longevity and quality of life, not only because it helps a person maintain their mental faculties, but it also generally increases social interaction, which can be a large factor in quality-of-life assessments, especially for single seniors,” says Matthew J. Ure, vice president, Anthony Capital, LLC.

According to Patrick Traverse, investment advisor representative, MoneyCoach, “The culture is changing. More people want to stay active and continue contributing to society. A semi-retirement could be the best of both worlds.”

Types of Work Available to the Semi-retired

With few exceptions, almost any type of work for which a retiree is qualified can be turned into a part-time position. Here are a number of possibilities you can pursue.

Switch From Full-Time to Part-Time

Shifting to part-time status with a previous employer is one of the easiest transitions to make. For someone who expects to have a hard time winding down from the old job, part-time status could be a perfect fit. 

Become a Consultant

Some retirees who can’t or don’t want to work for their old employer become a consultant in their old line of work. The biggest obstacle to this can be the existence of a non-compete agreement with the previous employer that could prevent soliciting former clients for a predetermined number of months.

Work From Home

One of the most desirable arrangements is a position that allows a retiree to work from the comfort of home. Thanks to the internet and smartphones, jobs including writing a blog, editing copy, website development, bookkeeping, tax preparation, and many more can easily fit into the work-from-home basket.

Start a Small Business

For retirees who want to jump in with both feet, turning a hobby, passion, or lifelong (or new) interest into a startup business can be immensely satisfying. This type of venture, however, can easily turn into putting in far more hours than you did while working full time. Additionally, “you will want to consider how much of your retirement funds you are using to start this business. Don’t invest a large portion of them in a risky venture, or you could put your retirement in jeopardy,” warns Kirk Chisholm, wealth manager and principal at Innovative Advisory Group.

Get a Job

Others want to simplify their lives by letting someone else call the shots. Examples include working in a retail store, for a nonprofit organization or church, and in the service industry such as home healthcare or being a driver for a limo, senior shuttle, or even school bus, to name a few.

Continuing to work after your full retirement age could increase your Social Security benefits.

Factors to Consider

Beyond the specifics listed above, there are other factors to weigh if you plan to work while retired. “Depending on how many hours you work per year, you could still receive access to your employer’s retirement plan and health insurance. There is also the potential to increase your Social Security benefits, depending on your earnings history,” says Mark Hebner, founder and president of Index Fund Advisors, Inc. and author of “Index Funds: The 12-Step Recovery Program for Active Investors.” Pay attention, too, to these caveats.

Income Tax

Some people find themselves in a higher tax bracket thanks to the combination of retirement income and part-time income. Adjusting work hours or withdrawals from a 401(k) is the best way to avoid that trap.

Early Social Security

Anyone who receives Social Security benefits before full retirement age, continues working, and makes more than the limit of $18,240 in 2020 will see his or her monthly benefits reduced $1 for every $2 over the limit until he or she reaches full retirement age. At that time withheld benefits will be returned by way of an increased monthly benefit.

Health Care Plan Decisions

Retirees who are eligible for Medicare while still working may also have the option of a company-provided health care plan. Depending on the plan, delaying Medicare Part B and D might make sense. The standard monthly premium for Part B for 2020 is $144.60, while the annual deductible is $198. Medicare Part A is free to most people, so signing up for it should be no problem.

The Bottom Line

More people are choosing to continue working part-time after retirement—some because they have to, others because they want to. The reasons aren’t as important as the need to pay attention to the consequences of the inevitable collision between retirement income and employment income.

Anyone who is approaching retirement or recently retired needs to consider the financial consequences of working while retired. Consulting with a trusted financial advisor is always a smart thing to do.