For decades, the goal has been to work hard, earn money and then retire! However, in recent years, the traditional retirement model seems to be changing. So what’s the alternative?
More retirees are deciding to slowly leave the workforce by reducing their hours or finding more fulfilling jobs, even if they pay less. This trend is known as semi-retirement. In a recent survey by Express Employment Professionals, most retirees said they would choose semi-retirement if their employer offered it.
If you feel this lifestyle suits you, there are some steps you can start taking now to ensure you’re ready to transition to a semi-retired life.
Prepare Your Finances
Before you consider transitioning to a partially retired life, make sure you have a plan for your finances. Even though you will still be bringing in money each month, make sure to check with your financial adviser to see how much money you have in your retirement accounts and how you can adjust your budget as needed.
If you’ve already started taking Social Security before your full retirement age and are still working, you will get a reduction in your benefits if you make more than the exemption amount laid out by the Social Security Administration. In 2022, that amount is $19,560. Fortunately, you will only see this reduction until you reach your full retirement age.
If you haven’t started taking Social Security benefits but you’re thinking about it, there are some things you’ll want to consider. You can start claiming benefits as early as age 62, but the longer you can afford to wait for those benefits, the larger your payments will be each month. Once you turn 70, those benefits won’t increase anymore, so it doesn’t always make sense to wait longer than that.
You will also want to consider your health care costs. If you are eligible for Medicare but decide to stay employed, you can hold off on taking Medicare Part B and D benefits and take advantage of your company’s health care plan if you work for a company with 20 or more employees. Since Medicare usually covers basic health care needs, using an employer plan could give you some financial support when you are paying for medications, hearing aids, dental care and even long-term care.
If you work for a company with less than 20 employees, you will need to apply for Medicare. In most small businesses, after age 65 your health expenses will be covered by Medicare first and any other employer-based plan second. Generally, your employer-based insurance at a small business may not cover all of your expenses.
Assess Your Employment Options
There are a number of employment options to consider when planning for semi-retirement. If you want to stay with your company, see if they offer semi-retirement options. You could reduce your hours and stay in your role, or use your knowledge to become a consultant or mentor for up-and-coming employees who could eventually slide into your current role. Not all employers offer this option, so make sure you do your research and talk to your boss.
