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The Rise of the Semi-Retired Life


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 data from the U.S. Census Bureau and the Bureau of Labor Statistics, 13 million Americans age 65 and older will be in the labor force by 2024. So what does a semi-retired life look like?

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.

What Is Semi-Retirement?

Instead of going straight from full-time work to dropping out of the workforce entirely, some people choose to transition to fewer hours, or leave a demanding full-time job for something less stressful or more fulfilling, even if it pays less. This is known as semi-retirement.

Why People Choose a Semi-Retired Life

Many people continue working at least part-time after retirement due to 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. Even on a part-time basis, earning some money during these years allows them to delay taking Social Security (allowing for a higher benefit), reduce or delay distributions from retirement accounts, and continue to save for retirement.

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 sit around and do nothing. Longer life expectancies have brought about what some call a re-imagining of later life that concentrates more on being active than on relaxing and taking it easy.

13 million

The number of Americans age 65 and older who will be in the labor force by 2024, according to Bureau of Labor Statistics (BLS) estimates.

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 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.”

“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. There are a number of popular jobs and opportunities 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—and what employers have learned during the pandemic—jobs including writing, website development, bookkeeping, tax preparation, and many more have been shown to 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 people clocked 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 service-industry positions such as home healthcare or as a limo, senior-shuttle, or school-bus driver.

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.

Social Security

Anyone who receives Social Security benefits before full retirement age, continues working, and makes more than the exempt limit of $18,960 in 2021, and $19,560 in 2022 will see their monthly benefits reduced by $1 for every $2 over the limit until they reach full retirement age. During the year they reach full retirement age, their benefits would be reduced by $1 for every $3 over a limit of $50,520 in 2021, and $51,960 in 2022. However, that money would be credited back to them after they reach full retirement age.

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. The standard monthly premium for Medicare Part B enrollees will be $170.10 for 2022, an increase of $21.60 from $148.50 in 2021. The annual deductible is $233 in 2022, an increase of $30 from $203 in 2021. 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 has recently retired needs to consider the financial consequences of working while retired. Consulting with a trusted financial advisor may be a smart idea.

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