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, 60% of people over age 60 said they planned to look for a job after retirement, according to Harris Interactive. And a survey by Merrill Lynch and Age Wave found that three out of four workers over the age of 50 said their ideal retirement would include working.
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 Merrill Lynch survey, 80% of retired respondents said they worked part time because they wanted to. Only 20% said they had to work.
For some the desire to get a part-time job is about not wanting to vegetate. Longer life expectancies have brought about what some call a reimagining of later life that concentrates more on being active than relaxing and taking it easy.
Others use retirement as an opportunity to start their own business. For many, the idea of a new career based on an interest, passion or hobby is often 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 Timothy R. Golas, partner, Spurstone Executive Wealth Solutions, Avon, Conn. "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."
Merrill Lynch noted that 83% of respondents in its survey said working was an antidote to aging. Almost two-thirds (66%) said they believe not working would lead to health problems and mental decline.
"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-Southwest Region, San Antonio, Texas.
"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," says Patrick Traverse, investment advisor representative, MoneyCoach, Mt. Pleasant, S.C.
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. You can:
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 pre-determined number of months (see Don't Sign That Non-Compete Without Reading This).
Work from home – One of the most desirable arrangements is a position that allows a retiree to work from the comfort of home. Fortunately, thanks to the Internet and smartphones, jobs including writing a blog, website development, bookkeeping, tax preparation and many more can easily fit into the "work from home" basket. (For more, see Best Freelancing Jobs for Retirees.)
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 at Innovative Advisory Group in Lexington, Mass.
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 (limo, senior shuttle or even school bus, to name a few). (Also see: Seven Fun Part-Time Jobs for Retirees.)
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., Irvine, Calif., and author of “Index Funds: The 12-Step Recover 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 normal retirement age (Social Security also calls it full retirement age), continues working and makes more than the limit of $16,920 (for 2017), will see his or her monthly benefits reduced $1 for every $2 over the limit until he or she reaches normal retirement age. At that time, withheld benefits will be returned by way of an increased monthly benefit. (For more see: How Does My Part-time Job Affect Social Security?)
Healthcare plan decisions – Retirees who are eligible for Medicare while still working may also have the option of a company-provided healthcare plan. Depending on the plan, delaying Medicare Part B and D might make sense. (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, most 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 approaching retirement or recently retired needs to consider the financial consequences of working while retired. Consulting with a trusted financial adviser is always a smart thing to do.