Retirement isn’t what it used to be for many. It’s no longer just hanging your hat up and heading to the golf course. It’s about finding new purpose, staying active, and yes, even working. Whether it’s a full-time passion project or a part-time employment, semi-retirement is redefining the golden years, and we’re here to explore that subject today.

Let’s get started. Number one, semi-retirement can really help you sometimes when it comes to Social Security. You say “Why?” Because if you’re working and you’re earning a little bit of income and it’s, I’m talking a little bit compared to what you were earning whenever you were working full time, then that little bit of income, especially if you’re married and there’s two little bits of income, that could add up to enough that you delay having to take your social security. What does that do for you? Well, it could do several things for you.

Number one, every year you wait, it’s approximately 8% more you get when you finally do turn it on. So if you get 8% plus whatever the cost of living raise is for that year. For instance, last year in 2024 with a 2.7% cost of living raise and an 8% just uptick because you waited a year, you got a 10.7% raise by waiting that one year. That’s pretty huge. Another thing that could do for you is many people haven’t completely worked all 35 earning years, and you say, “Well, I thought it was only 40 quarters or 10 years, right?” That’s to qualify, but you want to max out your social security and what they do when they calculate your benefit, they take your top 35 earning years, you better check it out on the ssa.gov website because you may find that you only have 31 years, 30 years, 29 years, 32 years.

You say, “What do they do for those other years up to 35?” They give you a big fat zero, and that brings your average down. So working a few more years in this semi-retirement state, number one could really help you when it comes to social security.

Number two, working a little bit longer could really help your retirement savings. You may have a position at work where you can go to a semi position, a 30 hour a week, a 20 hour a week, a contract type position where you can keep your 401k and you can still contribute to your 401k. What difference does that make? All the difference in the world! Because instead of retiring and starting to draw on that 401k, you don’t retire, you semi-retire and you continue to add to best case scenario to that 401k every single year. So instead of having one less year that you’re not contributing, you’re actually contributing one more year and you’re not doing a drawdown on that a year early.

So every year it’s a positive that you’re adding to it potentially, and it’s a positive that you’re not drawing down on it potentially. So that 401k could continue to grow. You could continue to contribute if you get the right kind of part-time job, semi-retirement or just working on a part-time basis, whether it be two months here, take a break, two months, take a break. You’d be amazed what companies are willing to do, especially if you have an expertise. It could really help, number two, your retirement savings that you’ve got in those retirement plans.

The third thing that a semi-retirement might do for you is it might give you company benefits for an extended period of time. You say, “What do you mean?” Your health insurance, particularly if you’re retiring at 62, 63, 61, you’re going to have to bridge to the point of social security/Medicare.

Well, when you get on Social Security/Medicare, that’s automatic. That’s pretty good. It doesn’t cost generally as much as health insurance costs from the ages of 60 to 64, but if you retire and you don’t have that job, it could really cost you a lot to have that health coverage and what are you going to do for your dental coverage and what are you going to do for your vision coverage? So that third thing is really important is what could it do in the way of keeping my employee benefits? That might really be a benefit to me when I’m 61, 62, 63 and 64 until I hit that magic Medicare button and I get closer to the social security.

Number four, a little tricky here, but it could really help you from a tax standpoint maybe to semi-retire. Now, here’s what I mean by that. Very few people know that when you turn 65 and you go on Medicare to calculate your Medicare part B in part D, they’re going to look back at your income for the previous two years.

Well, let’s say you’re 63 and you can afford to retire, all other things being equal, but you decide just to go to a semi-retirement where you’re working part-time. What that does for you is two things. It lowers your tax basis in general at that time because you’re not making as much on a semi-retirement as you are on a full-time working schedule. So you’ve lowered your tax basis for the years of the age of 63 and 64 plus. The big benefit is when you get to 65 and you go on Medicare, you’ve lowered your potential part B and part D because the previous two years, instead of working full-time, you have semi-retired. So your income is, and that calculation on what you’re going to pay for part B and part D on Medicare is going to potentially be lower. Big tax efficiency is number four.

Number five, this might be a touchy feely. If you go from full-time employment to a semi-retirement before completely retiring, it might serve as a bridge because a lot of people have found their significance in that, their social structure, their friends, the people they hang out with even more than they do their family sometime are those people at work. And just to cold turkey just shut that off and to have no bridge into retirement, a lot of people are lost. And I’m not talking about financially, and I’m not talking about other ways. I’m talking about just from a social wellbeing standpoint. They’re lost because their friends are gone, and their relationships are gone and it’s just stopped cold turkey and they never see some of those people ever again the rest of their life. So maybe bridging down, slowing down, and a lot of people do this by taking those tremendous number of hours of sick pay, of vacation pay of PTO that they’ve got built up, and they begin to take it off that way and sort of go into a semi-retirement where they’re not working as much.

If you don’t have any of those things, you may just choose to ask your employer if you could go to a part-time basis so you could begin to get used to that and to also build some relationships outside of work. So, it’s not just a stop point, but it’s a bridge into retirement.

So, is semi-retirement for you? I know everybody wants to work less and earn just the same, and everybody wants to back off a little bit on work, but the biggest thing you need to do before you decide to go into semi-retirement is you need to make sure that you’re financially structured in your retirement plan, that you’re able to handle it. Then you can look at social security, you can look at your retirement plans, you can look at all the things we discussed today because your situation is different than anybody else’s. And that’s where we tell people you need somewhat of a blueprint and your blueprint is going to be different than your brother’s. It’s going to be different than your fellow employees at work because what you’ve saved and what you’ve put away in your retirement plan and your social security and all of those things are different to you. So if you need help, if you need some counseling on that, it’s what we do all the time. We’d be more than happy to help you.

I promise you every week, if you’ll give me a few minutes, I’ll do my best to increase your financial knowledge and if we can help you particularly about a situation, a question, anything you’ve got, go to the website, get an appointment, give us a call. We’ll see you next time!