Written by Hi, it’s Dre Griggs with Obsidian Wisdom. Today we answer the question, should I continue working part time in retirement? When considering retirement, we often think about finances first. If we have enough money, we won’t work, and if we don’t, we will. However, there are multiple aspects to consider beyond just the financial. Let’s dive into these considerations to help you make a well-rounded decision.
Financial Considerations
We’ll start with finances because it’s the primary driver for most of us. Here are three examples to illustrate the financial impact of working part time in retirement.
Supplementing Your Income
Jane, a 65-year-old retiree, has $500,000 in retirement savings and receives $1,500 from Social Security each month. Her monthly expenses are $3,000. Without part-time work, Jane would need to withdraw $1,500 from her retirement savings each month, totaling $18,000 per year. However, if Jane works part time and earns an additional $1,000 per month, she only needs to withdraw $500 from her savings each month, totaling $6,000 per year. This drastically reduces her withdrawal rate, extending the longevity of her retirement savings.
Health Insurance
Derek, 62, isn’t yet eligible for Medicare and finds health insurance costs $700 per month on the exchange, totaling $8,400 per year. If Derek works part time and qualifies for health insurance through his employer, he can save that $8,400 each year, preserving his retirement savings for other needs.
Social Security Benefits
Susan, 63, plans to work part time and earn $20,000 per year. Her Social Security benefit is $1,800 per month, or $22,000 per year. Social Security has an earnings limit of $22,320 in 2024 for those under full retirement age. Earnings above this limit reduce benefits by $1 for every $2 earned. Since Susan’s part-time income is below the limit, her Social Security benefits remain unchanged, allowing her to earn an additional $20,000 annually without penalty.
Personal Fulfillment
Working can provide personal fulfillment, whether through maintaining friendships, finding purpose in your work, or developing new skills. If you enjoy your job and find it fulfilling, continuing to work part time might be a great option.
Using Your Skillset or Finding New Ones
Retirement can be an opportunity to explore new careers or hobbies that weren’t feasible while working full time. This might include taking on roles that pay less but are more enjoyable or offer opportunities to learn new skills.
Lifestyle Balance
Working part time can provide additional income to support a more comfortable lifestyle. This could mean more travel, spending time with family, or pursuing hobbies without financial stress. Some part-time roles even offer travel opportunities themselves, such as being a travel nurse or flight attendant.
Physical and Mental Health
Staying active and engaged can benefit both physical and mental health. Part-time work can provide the necessary structure and social interaction to keep you active and engaged. However, if your job is stressful, it might not be the best option for maintaining your health.
Practical Considerations
Consider the practical aspects of your retirement plan. Do you need additional income to meet your financial goals? Would working part time allow you to maintain your lifestyle without financial stress? Sometimes, working a few more years full time can eliminate the need for part-time work later.
Transition Plan
Creating a phased retirement plan can ease the transition. Gradually reducing your work hours can help you adjust to retirement while still providing income and purpose. This approach can also benefit your employer by allowing you to train your replacement.
Final Thoughts
Deciding whether to work part time in retirement involves more than just financial considerations. It’s essential to think about personal fulfillment, using your skillset, lifestyle balance, physical and mental health, practical aspects, and your transition plan. By considering all these factors, you can make a wise decision that aligns with your values and goals.
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