The word ‘retirement’ often has the connotation of an immediate and complete transition out of the workforce and into an uninterrupted life of leisure. However, for many individuals, full-time retirement might seem too abrupt, particularly if your work represents a significant part of your identity and is fundamental to your financial well-being. If this rings true for you, you might consider transitioning into retirement. Working part-time as you approach retirement can help to reduce stress and free up personal resources, while offering professional and financial perks.
As with all major life, work and financial decisions, there are a number of important factors to evaluate. SageVest Wealth Management’s ‘top of the list’ questions to ask include the following recommendations.
Are You Financially Prepared?
Ideally, you have the financial freedom to consider a transition into part-time pre-retirement employment. However, it’s always important to consider your options and understand the financial flexibility needed to achieve a successful transition. Planning and exploring various scenarios can help you formulate sound financial and life plans for you and your family. SageVest Wealth Management advisors typically look at various ‘what-if’ scenarios. Comparing and contrasting different outlooks, including part-time work, full-time work, and/or full-time retirement can help you to put things in perspective.
Is Part-Time Employment Realistic Given Work Time Demands?
Some jobs can easily adapt to part-time status, while others are more complicated. Take the time to evaluate your position, company, workload, staffing and more, to assess how easily you could realistically pull-off a true part-time work load. The last thing you want to do is to transition to part-time work, only to find yourself working just as hard, but for less pay.
How Long Might Part-Time Be Feasible, For You And Your Employer?
Questioning how well a part-time status works for you and your employer, both immediately and longer-term, is a distinct consideration. Work and company demands can vary, particularly in certain industries or company structures. If you don’t know how long part-time hours may last for you and/or your employer, make sure you have financial flexibility to fully retire should your part-time employment horizon be shorter than expected.
Could Your Pension Benefits Suffer?
If your employer offers pension benefits, part-time retirement could be a financially dangerous move. This is because pension benefits might be based off of your most recent or average income. Working part-time, with lower earnings, could translate into lower pension benefits for life.
Do You Need Early Pension or Social Security Benefits?
If the only way you can economically consider moving to part-time work status is if you’re receiving pension or Social Security benefits, then you could be making an unwise decision regarding your financial future. Early commencement of pension or Social Security benefits can translate into lower payments for life. Furthermore, if you’ll be relying upon a combination of benefits coupled with earned income, you’ll need to be sure that your personal savings can replace the latter once you stop working. Planning can help you to assess and answer all of these questions.
Will Your Health Insurance And Other Benefits Change?
A number of employer benefits are often only extended to full-time employees. These can include health insurance, life insurance, disability insurance, retirement benefits, stock plans, and more. Reviewing your benefits coverage in advance is essential to identify what you might lose, what you need to replace and any associated costs, and what you can forego.
Could You Return To Full-Time Work?
Whenever you make a life decision, you always hope it’s the right one, but you don’t always know for sure. When considering transitioning into retirement with part-time hours, it’s important to ask yourself if you can reverse course and return to full-time work status should you need or want to do so.
Is Consulting Or Self-Employment Realistic?
Transitioning to part-time work doesn’t always mean staying with your current employer, or even switching to another employer. You may be able to go solo or consult on a 1099 or self-employed basis. However, there’s a lot to consider before making such a change in your employment structure. You need to understand self-employment taxes, benefit changes, insurance needs and costs, liability exposure, and more. There are also important questions to ask yourself, such as how marketable you are, what earnings level could be derived, and if you have the self-diligence, aptitude and determination to run your own small business.
As with all financial and life decisions, SageVest Wealth Management is available to help you evaluate what your retirement aspirations might mean to you, whether they’re full-time or part-time, near-term or long-term term. Please contact us if you’d like to discuss your unique personal retirement considerations.