If you haven’t properly saved for retirement, it will be difficult not to have a part-time job for needed supplemental income. However, there seems to be a growing trend of “want” instead of “need” among individuals who pick up a part-time position after retirement.
Understanding the need of part-time employment during retirement
Years ago, Social Security benefits were much more secure and healthcare costs were lower for those in retirement, because people did not live as long. Today, however, the landscape is not the same.
“Retirement today is not that of a generation ago. Gone is the day of a company pension, company-paid healthcare and secure Social Security,” says Ted Sarenski, president and chief executive officer of Blue Ocean Strategic Capital LLC, in a May 2012 article for CNBC. “Today’s retiree is faced with self-sufficiency and, as such, needs to work at least part time ‘in retirement’ to have enough money to pay the costs of living that were once paid by someone else.”
According to a May 2012 article for CNBC by contributor Cheryl Winokur Munk, if you retire before age 65, you may find having a part-time job is necessary just to give you healthcare coverage until you are eligible for Medicare. You may want to continue with your part-time job even with Medicare, as your employer’s plan could offer provisions not covered by Medicare.
In short, as long as you account for the increased healthcare costs and overall costs for living in retirement and plan accordingly, you could turn this “need” for part-time work into a “want.”
Going back to work after you retire to fulfill other needs
For some, going back to work after retirement isn’t to fulfill a need for income. Instead, it’s a way to stay energized and invigorated in a new chapter of their life.
“We’ve seen a number of our clients interested in procuring part-time employment in retirement as a way to supplement cash flow, maintain employer benefits, and stay mentally and physically engaged,” reports finance professional Brian Vnak in a June 2015 article for MarketWatch.
In fact, according to a March 2016 article for MarketWatch by Editor Catey Hill, the desire to go back to work extends beyond the tangible benefit of earning extra money.
“Seventy-two percent of adults age 50 and older say they want to keep working after they retire, and nearly half (47 percent) of current retirees say they either have worked or plan to work during retirement, according to a survey of more than 7,000 adults by Merrill Lynch Bank of America Corp.,” Hill reports.
According to the same survey, retirees’ top reason for going back to work is to remain active and mentally sharp, with making extra income reported as a second important reason.
Besides the obvious benefit of added cash flow, a part-time job during retirement can be beneficial, as it will improve your earnings history, which can in turn increase your Social Security benefits. Furthermore, this income stream can help you delay taking your Social Security, the benefits of which will increase by 8 percent each year past the full retirement age of 70, adds Vnak.
If you can wait to collect until after you’ve turned 70, the supplemental income from a part-time job can not only help you extend the life of your retirement accounts but also allows the funds remaining in the accounts to continue to grow with compounding interest.
However, if you are currently receiving Social Security and considering a part-time job, you’ll need to calculate and think about just how much of your benefits would be taxed. SSI benefits are taxable based on provisional income, which includes wages, capital gains, dividends, retirement distributions and half of your Social Security benefits. So while the job may bring in more money, it may harm the amount you can receive in SSI, advises Vnak.
In the end, taking a part-time job in retirement as a want isn’t for everyone, and you should consider your long-term plans and financial needs before accepting any position.