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9 tips to make it work for you

  • Semi-retirement has become increasingly common as more and more people slowly transition into life after work.
  • People can pursue their passion, work part-time, or consult instead of stopping work altogether.
  • This article is part of the “Re/Thinking Re/Tirement” series focused on inspiring financial planning for a different kind of future than the 9-to-5 life allows.

According to the traditional idea of ​​retirement, you work for decades, while saving enough money to eventually cut the cord from your career and live a life without work. The dream is to be able to visit family, travel, volunteer, maybe pursue a favorite hobby. Full retirement was the ultimate goal, representing freedom and a stress-free life.

There was a clear separation between work and retirement. You did one or the other. That was then. Today, more and more people approaching or have reached retirement age are choosing a lifestyle called semi-retirement, which combines the two.

What is semi-retirement?

When a person works full-time and decides, instead of full retirement, to work part-time, become a consultant, or work in a more fun or meaningful position, they are considered semi-retired. Rather than plunge into retreat, they wade slowly.

A person may choose semi-retirement for various reasons.

Justin Stevens, a CFP® professional at O’Keefe Stevens Advisory, points out that financial necessity is often behind the decision. With increasing wealth, education and advances in medicine leading to a longer life, “retirement today could be a four-decade endeavor,” he says.

“With the cost of living steadily rising, today there is a higher likelihood of running out of money later in life,” says Stevens. “Some people would rather work longer and delay spending their hard-earned savings, delay taking Social Security, and let their money keep accumulating.”

Jordan Grumet, author of “Taking Stock: A Hospice Doctor’s Advice on Financial Independence, Building Wealth, and Living a Regret-Free Life,” notes that a small income during semi-retirement can make a big difference.

“Even funding 25% of annual expenses with external sources can make a previously fragile retirement portfolio strong,” says Grumet. “Plus, employer-sponsored health care and access to retirement savings vehicles like 401(k)s with employer matching make semi-retirement an even smarter choice. “

Others choose semi-retirement simply to stay active. The thought of retirement may seem boring to them. They want a reason to get up in the morning and have a routine.

Some people at retirement age leave their regular jobs and take positions that pay or make a difference, even if the pay is only a fraction of what they earned in their full-time job. Still others choose to continue working after retirement to remain involved in the community. This group might decide to get a job just to be around people, whether they need the money or not.

Types of work for semi-retired people

There are many options available for semi-retired people to remain employed to some extent. They can decide to stay in their current company on a part-time basis or decide to consult in their specialty. They might switch gears completely and try something new that matches their hobbies and passions. Or they may take a job with less stress — at a library or grocery store, for example — to pass the time and earn some extra cash.

Many employers who once only hired full-time positions see the benefit of keeping employees at retirement age longer. These employees are loyal, have a good work ethic and offer decades of knowledge and experience. Part-time work and flex positions are expected to become more common over the next decade.

And there will likely be plenty of retirees willing to take them. A 2022 survey commissioned by the Benefits Research Institute found that 70% of workers believe they will work for pay in retirement. It also showed that only 27% of current retirees do so.

Job prospects after retirement are changing, says Alan Kirby, licensed financial consultant at Ridge Brooke Tax and Retirement Planning in Tennessee. There are more options than ever for people of retirement age who want to continue working, either in a scaled-down version of their current role or in an entirely different job.

“Today’s semi-retirement has evolved far beyond the idea of ​​leaving a good job to go and be a host at Walmart,” says Kirby.

9 tips to prepare for semi-retirement

If you’ve researched semi-retirement and think it sounds like a good option for you, start preparing for change now. Just like full retirement, the sooner you act, the easier the transition will be. These nine tips will help you pave the way for a smooth transition into semi-retirement and beyond.

1. Make a realistic plan

You can’t effectively move on to the next stage of your life until you know where you are now.

“One of the most important parts of semi-retirement is making sure you have enough savings to cover your expenses,” says Linda Chavez, founder and CEO of Seniors Life Insurance Finder. “Take the time to assess your current financial situation and set goals for how much money you will need to support yourself in semi-retirement.”

Compare your current expenses and debts to the retirement assets you will use. Measuring the two gives you an idea of ​​how much income you’ll need in semi-retirement.

2. Pay down your home

Your home is probably one of your most valuable assets, and your mortgage can be your biggest monthly bill. Removing it from your budget significantly lowers your expenses. In addition, housing stability is already supported.

3. Simplify your life and your belongings

Preparing for semi-retirement is the perfect time to cut down on unnecessary expenses and expensive possessions that don’t add value to your life. Focus on what matters most to you and eliminate the rest.

“Before you pursue the semi-retired lifestyle, you should ask yourself why you want to semi-retire,” says Greg Middendorf, a CFP® professional at HCM Wealth Advisors. “Clarity in your reasoning will help you achieve these goals. For a successful outcome, prioritize the things that are important to you.”

4. Focus on deleveraging

High debt and large monthly payments can strain your budget, especially if you earn less than when you worked full time. Reducing your debt as much as possible makes semi-retirement easier.

“When you decide to live a semi-retired life, it’s important that you focus on paying off any existing debt you may have,” says Middendorf. “Long standing debts can seriously hamper your financial stability and your dream of semi-retirement.”

5. Find ways to earn passive income

The money you have saved so far is vital, as is the money you can earn in semi-retirement. Consult your financial adviser before you get started to make sure you don’t sabotage yourself later.

Find investments that create a passive income stream. Dividend-paying stocks, certificates of deposit (CDs), annuities and bonds are some of the options. Rental real estate is another way. Some people create YouTube channels or websites that they can use to generate income. Using your talents to build an income helps fund your semi-retired lifestyle.

6. Discover how to make money with your passion

Semi-retirement can come sooner if you convert your passion into a lucrative business. Have you always enjoyed woodworking, gardening, photography, sewing or drawing? Find a way to use that interest to generate income. This way you can do what you love and earn money.

7. Organize your health insurance plans

One of the biggest expenses semi-retired people don’t plan for is health insurance. Many full-time jobs foot the bill for most or all of their employees’ health insurance premiums. These will be your responsibility when you leave your post.

“Health insurance before Medicare starts is expensive!” says Patti Black, CFP® Professional at Bridgeworth LLC. “Continuing to have group health insurance or working part-time can help offset this cost, which can help increase your chances of financial success in retirement.”

According to JustCare USA, a digital platform that provides data and information to help baby boomers navigate healthcare choices, women age 65 should have $159,000 set aside for healthcare costs. 65-year-old men, because they have a slightly shorter lifespan, should have $142,000 aside.

8. Look for deals to stretch your dollars

In addition to reducing your expenses, take advantage of programs that offer discounts to semi-retirees.

Katie Ross, executive vice president of American Consumer Credit Counseling, recommends turning to state and local organizations for discounts on daily expenses.

“Organizations like AARP or the Association of Mature American Citizens can help you save money,” says Ross. “Your local senior center and city offices can also help. Some cities offer seniors discounts on things like property taxes and water and sewer bills if you qualify.”

9. Keep your options open

Going into semi-retirement does not mean that you will never be in the full-time job market again. In most cases, moving is a step towards full retirement, but not always.

“If you have a professional designation, license, certification or security clearance, it is highly recommended that you find a way to maintain them,” says Brad Nelson, CFP® Professional at Lyon Park Advisors, LLC. “You’ve worked hard for them and they’re almost always much easier to maintain than to recover if you let them down. The point, of course, is to keep your options open if you find retirement isn’t for you. you.”

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