6 Benefits to Working Part Time in Retirement

Done and dusted. I’ve put in my time, collected my gold watch (most don’t get those anymore) and retired.

I don’t plan to work another moment in my life.

Hmmmm…

For most, barring health issues, while it may sound good to begin with, not working some during retirement might lose its luster.

Intro

If you haven’t ever considered working part-time in retirement, there are actually plenty of good reasons you might want to reconsider doing so.

Retirement can last a long time. 20 to 30 years of sitting around can quickly turn into an eternity of boredom.

Your mental and physical health, income needs, desire to enjoy camaraderie, and the special feeling of job satisfaction upon completing good work or accomplishing something, among other things, might lead you back to the workforce, albeit on a part-time bases.

Here are six reasons you might want to work part-time in retirement and gain real benefit from doing so.

Mental and emotional health

Most won’t start here, but the truth is inner peace and contentment are what life are really all about, so your mental and emotional health are absolutely the best place to do so.

Prior to retirement the experience for many is that of living on the rat wheel. While we never set out to do so, simply existing, raising kids, keeping up with the Jones’ and trying to stay out of debt tended to be a primary focus for many in life.

Retirement gives us the time to focus more on what’s real (people, our relationships and memories) and less on the material, such as those things that previously motivated much of our thoughts and actions.

Yet, even if we can afford to travel and live luxuriously during the golden years, those things are material and will lose some of their alure in time. Most know, or come to realize, that a plane ticket to some faraway locale won’t necessarily bring fulfillment.

On the flip side, working till the day you drop sounds dreary and miserable.

As with all things in life, the key to real success is finding balance.

Think about your kids when they were young. They were miserable during the summers if they didn’t have anything to do. You probably actually paid to send them to camp so they would be occupied and you could work.

The same is likely to hold true for you in retirement. You can only play so much golf, travel or watch television all day long, year-in and year-out. There’s a good chance you’ll find yourself feeling just like your kids back in the day – bored and wanting to be doing something to occupy your time.

There’s also the issue of cognitive stimulation – maintaining our marbles. We naturally decline cognitively to some degree as we age, but this can be exacerbated when we no longer work, given the lack of stimulation that previously occurred daily in performing duties and maintaining a career.

Fact is that part-time work can be the answer when it comes to remaining active, keeping our cognitive ability sharp, being able to associate with others, and obtaining that feeling of job well done and the good vibe that comes from accomplishment.

When we feel better mentally and emotionally, we tend to feel good in general and our life is enhanced.

Financial stability

Beyond mental and emotional health, you have to consider your own thoughts on whether you have the financial stability to retire, or whether you might need to keep working even after you say, “Adios,” to your former employer.

Stability is not the same as the financial need, or lack thereof, necessarily.

A feeling of being able to control things, such as creating more income for yourself as needed, can provide a feeling of stability.

Compare that to the fear many associate with being limited to living on a fixed income and vulnerable to the unexpected that may come their way during retirement.

This is a very individualistic measure, based upon many factors, such as demographics, belief you can “fix” things if necessary, family, economic conditions you grew up in, and numerous other variables.

A good example is that of the “Greatest Generation” and “Silent Generation” demographic groups, many of whom grew up and lived during the Great Depression, Dust Bowl and WWII eras.

For many of the young who came of age during that period of prolific poverty, instability and fear, the ideal of financial security was understandably non-existent – simply surviving was foremost among their concerns. This was much different than their baby boomer children.

Nowadays, depending on who you listen to, Americans are to a lessor or greater percent sure about whether they have the financial resources and wherewithal to survive retirement comfortably.

For example, a 2021 Gallup poll stated that 80-percent of currently retired adults said they had enough to live comfortably in retirement. This is understandable given that people tend to fear what they haven’t experienced, but come to grips with most situations once they have done so. They are in the midst of being retired, so they tend to fear it less.

Not surprisingly, when asked the same question in that poll, 53-percent of non-retirees expected to have enough money for a comfortable retirement.

Compare that with a survey conducted by the Insured Retirement Institute, which found that roughly 18-perent of boomers felt confident they had or would have the money necessary to live comfortably in retirement.

There’s some definite disparity, especially between those already retired and those approaching that point.

Perhaps most telling today is the Employee Benefits Research Institute’s “2023 Retirement Confidence Survey,” which found that retirees’ and non-retirees’ confidence that they’d have enough money to live comfortably in retirement had dropped significantly from their 2022 survey.

Among non-retirees that number was 73-percent in 2022 for those being very or somewhat confident compared to 64-percent in 2023. For retirees, it dropped from 77-percent to 73-percent, respectively.

Obviously, both Covid and the onset of the highest inflationary environment dating back 50 years has had an impact on peoples’ feelings about financial stability. Fair to state that times of significant financial upheaval can cause such collective insecurity in a short period of time.

What is clear is that for some (perhaps yourself), working in retirement on a part-time basis is one way to help tamp down the misgivings one might have about financial stability in retirement.

Financial benefit

Okay, you knew it was going to come up – the financial benefits of working during your retirement.

The obvious starting point in terms of working in retirement is if you find that you didn’t save enough to be able to comfortably retire. This is a scenario many face, in which their retirement savings don’t cover their budgetary needs.

Whatever you did or didn’t save, a paycheck in retirement, even limited in nature, can go a long way towards supplementing and extending the savings you have accumulated over time.

Some key financial considerations regarding working even part-time in retirement:

• Delay when you begin using your retirement savings
• Potentially cover many of the essential expenses of your retirement budget, such as housing, food, utilities, health care, and more each month without using retirement savings
• Better maintain the standard of living you establish before retirement, such as eating out, memberships, living where you wanted (or envisioned for retirement), charitable giving, etc.
• Offset the cost of travel and vacations you want to enjoy during your retirement years
• Allow you to keep investing so you can continue to grow your retirement savings each year
• Improve your ability to better adapt to changing conditions and able to deal with the unexpected events and expenses that will come your way during your retirement years
• Delay the need to begin taking social security. Every year you delay starting your benefit increases until you reach the maximum age of 70, at which point your benefit will reach its highest amount

Back to the point about paying your bills monthly without tapping into retirement funds, that can be a huge deal. Working part-time, even in a relatively low-paying job, can help preserve your retirement portfolio.

Consider the fact that if you determine your monthly retirement budget will be $4,500 when retiring at age 66, and that you will receive $2,500 in monthly Social Security benefits, you will need to pull $2,000 each month from your retirement savings to cover the shortfall.

But earning just $1,360 per month part-time (20 hours per week at $17 p/h) would eliminate the lion’s share of your shortfall, and if you received insurance from your employer that would reduce your healthcare expenses.

The $16,320 earned from working half-time at a relatively low-paying job would allow the money you would have used from retirement to continue to grow and compound.

If you had $400k in retirement savings earning 5-percent on average, that account would grow relatively little to nearly $421k over five years (age 66 to 70), given you had to draw $1,360 monthly ($16,329 annually) to cover your budgetary needs. (Calculated using the Oak Harvest Retirement Nest Egg Calculator)

In the same scenario, the same amount of money earned working part time would offset the shortfall. Simply allowing the $400,000 to remain and grow over the same five years, with no additional investment, would enable your savings to grow to over $513k.

And that money would have to last for fewer years going forward, making it more likely you wouldn’t outlive your assets.

Granted, you had to work half-time during that period, but given the increased value in your retirement savings, as well as potential to save on healthcare through potential employer paid insurance over that period, is actually quite considerable and worth consideration.

Bridge the gap to Medicare

If you retire prior to age 65, you may be looking at a serious increase in health-related expenses, especially if you previously had employer-sponsored health insurance.

Given Medicare doesn’t kick in for most until age 65, you will need to cover the cost of your healthcare out of pocket until that age, including insurance or medical expenses. Those costs are going to present some very major sticker shock to the average person.

A recent healthcare study by HealthView Services estimated that the average monthly cost of insurance in addition to Medicare for a healthy couple (age 65) would be approximately $1,023, not including LTC, and continue to rise over their lifetime.

Given that backdrop, working part time can provide two big benefits to retirees not yet eligible for Medicare coverage:

• The additional income can help cover some or all of the cost of insurance and/or medical expenses
• Many employers, especially larger ones, provide some level of insurance coverage for part-time employees, along with other benefits

By working part-time, you can save hundreds or even thousands of dollars every month if you retire before eligible for Medicare. The same can be true for those retiring at age 65 and older with Medicare.

Keep in mind that even when you qualify, not all costs are covered. Good examples include hospitalization, Long Term Care and prescription costs. Employer-sponsored insurance can help bridge the gap or enable you to pay the extra cost for Medicare supplemental insurance.

Social engagement

We mentioned previously that working part-time can lead to better mental and emotional health in general, but the social aspect is worth its own consideration when it comes to a benefit.

If you reflect on your life, you will probably come to the realization you spent much time socializing with colleagues at work. You were part of a community. For that to suddenly stop occurring can lead to a vacuum and be very isolating.

Replacing those relationships can be tough to deal with, but a part-time job can allow for new ones to form.

Simple engaging in “water cooler” conversations, talking with co-workers about projects, going to lunch and attending company gatherings can be invigorating and something to look forward to once you’ve gone without those things for even a short time. You are once again a part of a community.

New opportunities

Greeting guests at Walmart or working fast food are probably the first thoughts that come to mind when thinking about working part-time after you retire. Let’s face it, that’s not the ideal most would look forward to doing.

But it doesn’t have to be that way. This can be the opportunity to try something new or that you always thought about during your career.

You have skills and expertise, so consulting opportunities can be available and very lucrative, even on a part-time basis. Chances are you have the contacts and a built-in network in place to utilize, which can make the transition fairly easy. And you get to determine your own hours and level of engagement.

Then there are the passions or hobbies you’ve always carried around or participated in. Monetizing them by turning them into a side gig or even a business is something that should be considered.

Beyond potentially creating income, they can represent a stimulating new challenge that can actually increase your quality of life and help you live longer.

Conclusion

The ideal of retirement is different for each person. Some absolutely can’t wait until the day they are able to walk away, while others view it with trepidation.

No matter where you might find yourself in that regard, the issue of working part-time after retiring is something you may wish to consider if you haven’t already.

There are numerous benefits that can be obtained from doing so, ranging from social, well-being, financial, and even the excitement of engaging new challenges and opportunities, or gaining the satisfaction of continuing to contribute in life.

Whatever the reasoning, a decision to work in retirement should be part of a bigger picture issue – having a plan for your retirement. It’s important to create a comprehensive retirement plan that will guide you when you eventually move to that next stage in life.

If you haven’t already done so, now is the time to consult with a financial advisor or retirement planning specialist to learn more about retirement so you can make informed decisions, such as whether it makes sense for you to work part time once you retire.

At Oak Harvest Financial Group, we specialize in financial management and retirement planning. We can work with you to address this issue, and much more, then help create a customized plan to meet your future needs and goals, while at the same time providing peace of mind for you during your retirement years.

If you’re ready to take the next step and talk to a team of financial advisors and retirement planners who put your interests first, Schedule a call today!