If you’re ready to retire but don’t want to leave the workforce
entirely, semi-retirement might be a good option for you. Before you
take the leap, there are strategies that can help you navigate this
For decades, the goal has been to work hard, earn money and then
retire! However, in recent years, the traditional retirement model
seems to be changing. So what’s the alternative?
More retirees are deciding to slowly leave the workforce by reducing
their hours or finding more fulfilling jobs, even if they pay less.
This trend is known as semi-retirement. In a recent survey by Express
Employment Professionals, most retirees said they would choose
semi-retirement if their employer offered
If you feel this lifestyle suits you, there are some steps you can
start taking now to ensure you’re ready to transition to a
Prepare Your Finances
Before you consider transitioning to a partially retired life, make
sure you have a plan for your finances. Even though you will still be
bringing in money each month, make sure to check with your financial
adviser to see how much money you have in your retirement accounts and
how you can adjust your budget as needed.
If you’ve already started taking Social Security before your full
retirement age and are still working, you will get a reduction in your
benefits if you make more than the exemption amount laid out by the
Social Security Administration. In 2022, that amount is $19,560.
Fortunately, you will only see this reduction until you reach your
full retirement age.
If you haven’t started taking Social Security benefits but you’re
thinking about it, there are some things you’ll want to consider. You
can start claiming benefits as early as age 62, but the longer you can
afford to wait for those benefits, the larger your payments will be
each month. Once you turn 70, those benefits won’t increase anymore,
so it doesn’t always make sense to wait longer than that.
You will also want to consider your health care costs. If you are
eligible for Medicare but decide to stay employed, you can hold off on
taking Medicare Part B and D benefits and take advantage of your
company’s health care plan if you work for a company with 20 or more
employees. Since Medicare usually covers basic health care needs,
using an employer plan could give you some financial support when you
are paying for medications, hearing aids, dental care, and even
If you work for a company with less than 20 employees, you will need
to apply for Medicare. In most small businesses, after age 65 your
health expenses will be covered by Medicare first and any other
employer-based plan second. Generally, your employer-based insurance
at a small business may not cover all of your expenses.
Assess Your Employment Options
There are a number of employment options to consider when planning for
semi-retirement. If you want to stay with your company, see if they
offer semi-retirement options. You could reduce your hours and stay in
your role, or use your knowledge to become a consultant or mentor for
up-and-coming employees who could eventually slide into your current
role. Not all employers offer this option, so make sure you do your
research and talk to your boss.
With so many work-from-home options, you could also find a new job
that is less demanding or is a passion project. You could work with
your favorite non-profit in a part-time role or get involved with a
local university and share your expertise with a new generation of
If starting a small business has always been your dream, this approach
to retirement might be a good option. After breaking away from the
9-to-5 grind, you will have more time and money to turn your hobby
into a business. With any new business, be prepared that you may have
to spend more hours than you thought to get the business off the
ground. Also, consider how much of your retirement funds you can
reasonably spend. A financial professional can help you sort out what
you need to live on and what you can put toward your new venture.
Plan for Taxes
If you are working in a part-time position during retirement and you
aren’t bringing in enough income to live on, you may need to withdraw
money from your retirement accounts, like a 401(k) or IRA. If you do,
you will need to pay taxes on that income as well.
If you start withdrawing from your retirement accounts before age 59½,
you will also have to factor 10% early withdrawal penalty into your
budget. Make sure you adjust the hours you are working or the amount
you are planning to withdraw to make sure you aren’t surprised by your
tax situation when it’s time to file.
No matter what you decide to do in your retirement, a financial
professional can help you navigate all your options and create a plan
that fits your lifestyle. At the end of the day, it’s your retirement,
so choose what makes YOU happy!