The Rise of the Semi-Retired Life

For many, being semi-retired is better than being fully retired. Reasons vary from the need for supplemental income to a desire to keep using their skills. Whatever the explanation, a significant number of retirees are choosing to work part-time after they retire. 

In fact, according to data from the U.S. Bureau of Labor Statistics, the labor force made up of people aged 75 years and older is expected to grow by 96.5% by 2030.

So, what does a semi-retired life look like?

Key Takeaways

  • Many people work after retiring because they have to, or because they want to, or both.
  • The options include becoming a consultant, starting a new business, getting a part-time job, and scaling back to fewer hours at an existing job.
  • There are income tax and Social Security complications if your total income is high enough.

What Is Semi-Retirement?

Instead of going straight from full-time work to dropping out entirely, some people choose to transition to fewer hours or take a less stressful or more fulfilling job, even if it pays less. This is known as “semi-retirement.”

For Miriam Friend, a 75-year-old photographer who lives in Staten Island, N.Y., full retirement was never her plan.

“When I turned 70, I decided it was time to scale back, but I never retired full-time. I don’t really have the interest to do so,” said Friend. Instead, she works for her own photography company, Studio 75, and powers through three busy periods during the year: fall and spring preschool pictures and day camp photos in the summer. She spends her free weeks tending to her garden and catching up with friends.

She welcomes unscheduled surprise jobs, such as parties, family photos, holiday photos, and headshots for businesses. The bonus income funds concert tickets and trips to visit her West Coast grandchildren once or twice a year.

For Friend, the best part of being semi-retired is getting to pick and choose the work she does: “I’m very selective and give myself plenty of time to take care of myself and enjoy this time of my life.”

Why People Choose a Semi-Retired Life

According to a 2023 Pew Research Center survey, senior workers are the group who most enjoy working. Two-thirds of workers ages 65 and older said they were extremely or very satisfied with their job overall, a higher percentage than their younger counterparts.

They also found their jobs to be enjoyable and fulfilling at a higher rate than younger workers.

But other motivations keep retirement-aged people in the workforce.

Financial Need

For a person with median earnings who worked steadily and retired at age 65, Social Security benefits replace about 37% of their past earnings as of 2022.

Combine that with the elimination of defined-benefit pensions for most workers in private industries, and it’s no wonder that many continue working at least part-time after retiring due to financial need. Workers with Social Security as their only retirement income often have no choice but to get a job. 

“I have always been self-employed, so I don’t have the luxury of a government or company pension to help me financially,” said Friend. “I need income to avoid drawing down my IRAs or savings too much, but since my house and car are paid off, and my children are up and out, my lower expenses allow me to work part-time.” 

Earning some money after retiring also allows many to delay taking Social Security to get a higher benefit later on, to reduce withdrawals from retirement accounts, and to continue to save for later on.

Staying Active

Longer life expectancies have led to a reimagining of life after age 65.

This was the case for Rich Zarillo, a retired detective and former EMT based in New Jersey who has continued to work part-time as an educator, teaching EMS, EMT, CPR, and basic first aid classes.

He also owns and operates an embroidery and decorating business. “When I retired, I made the decision to keep busy. I enjoy being out there educating those starting their medical journey, and I would never want to become stagnant or lazy,” said Zarillo. 

The extra income is also helpful, as the cost of living has increased even in the short amount of time since he stopped working full time in 2020: “I was once told that just when you think you’ll have enough for retirement, an unexpected bill or issue may arise, and you realize that you can’t work an extra shift to help pay for it.”

Pursuing a Passion

Others use their retirement as an opportunity to start a business.

This was the case for Stan Kimer, who, after a 31-year career at IBM retired early and formed his own diversity and career development consultancy. He went from working about 50 hours a week to only 25 to 35.

“I started planning my business three months after retiring, including utilizing some IBM career transition benefits (like coaching on how to start a business), and then opened up six months after retiring,” said Kimer.

Not Being Ready to Stop

“After a lifetime of hard work and the stress of the daily grind, retirement can be a daunting concept, even for those fortunate folks with substantial savings and wealth,” said Tim Golas, partner, Spurstone Executive Wealth Solutions. “How they will invest their time and continue to have meaning in their lives is a real and emotional challenge after they have often defined their value through their career and their work.”

Jobs for the Semi-Retired

With few exceptions, almost any type of work for which a retiree is qualified can be turned into a part-time position. There are a number of popular jobs and opportunities you can pursue.

Many seniors prefer to choose low-stress, part-time work that allows them to be socially and physically active, such as being a greeter in a retail store, working for a nonprofit organization or church, or filling service industry positions, such as working in home healthcare or driving a limo, senior shuttle, or school bus.

Here are some other potential semi-retirement paths.

Shifting to Part-Time

Shifting to part-time status and doing the same type of work with the same or a similar employer is one of the easiest transitions to make. For someone who expects to have a hard time winding down from their old job, part-time status could be a perfect fit. 

It’s what author, motivational speaker, and trainer Barry Maher did. “I always thought I’d retire as soon as I could afford it,” said Maher. “I worked hard, saved hard, and invested carefully in order to become financially independent. But once that happened, and I could actually afford to retire and I tried it, I realized just how much I loved doing what I’d been doing.”

As a bonus, his work takes him around the world, so he ends up visiting a lot of places he would have gone to if he’d retired.

Become a Consultant

Some retirees who don’t want to work for one employer become consultants in their area of expertise, as was the case for Kimer.

Just be sure that in doing so, you’re not violating any potential non-compete agreement with your previous employer.

Start a Small Business

For retirees who want to jump in with both feet, turning a hobby, passion, or lifelong (or new) interest into a startup business can be immensely satisfying.

This type of venture, however, can easily require far more hours than people clocked working full-time. For example, Zarillo said that when his embroidery business gets in a large order, he often ends up working more than 40 hours. Most weeks, however, his schedule is less hectic. 

A word of caution about this came from Kirk Chisholm, wealth manager and principal at Innovative Advisory Group, who warned, “You will want to consider how much of your retirement funds you are using to start this business. Don’t invest a large portion of them in a risky venture, or you could put your retirement in jeopardy.”

Delaying your Social Security payments beyond age 65 will permanently increase your Social Security benefit. You’ll reach the maximum benefit if you delay starting your payments until age 70.

Factors to Consider

There are other factors to weigh if you plan to work while retired. “Depending on how many hours you work per year, you could still receive access to your employer’s retirement plan and health insurance. There is also the potential to increase your Social Security benefits, depending on your earnings history,” said Mark Hebner, founder and president of Index Fund Advisors, Inc. and author of Index Funds: The 12-Step Recovery Program for Active Investors.

Pay attention, too, to the following caveats.

Income Tax

Many people find themselves in a higher tax bracket if they both work income and retirement income.

Tinkering with your work hours or 401(k) withdrawals are two ways to avoid that trap.  The latter strategy is somewhat restricted due to the required minimum distributions (RMDs) for traditional 401(k) and IRA accounts.

Social Security

Anyone who receives Social Security benefits before full retirement age, continues working, and earned more than $21,240 in 2023 will see their monthly benefits reduced by $1 for every $2 over the limit until they reach full retirement age.

During the year they reach full retirement age, their benefits would be reduced by $1 for every $3 over a limit of $56,520 in 2023. However, that money would be credited back to them after they reach full retirement age.

Healthcare Plan Decisions

Retirees who are eligible for Medicare while still working may also have the option of a company-provided healthcare plan. Semi-retirees can enroll in Medicare and keep their prior coverage but, depending on the plan, delaying Medicare parts B and D might make sense. 

Medicare Part A, the hospitalization coverage, is free to most people, so signing up for it should be no problem. However, keep in mind that some insurance plans will pay less or nothing for some services if the policyholder is eligible for Medicare.

It is always best to check with your insurance provider about how Medicare eligibility affects your coverage and how it will deal with Medicare should you choose to enroll.

Who Is Considered Semi-Retired?

You are semi-retired if you have hit your retirement age and left your full-time job but still continue to work part-time.

Can Being Semi-Retired Affect My Taxes?

Yes, it can. Adding part-time income to your retirement income can put you in a higher tax bracket.

Does Being Semi-Retired Change My Social Security Benefit?

Sometimes. If you have yet to reach full retirement age but have retired and begun taking your Social Security (which you can do starting at 62), you will see your benefit reduced by $1 for every $2 for the amount you earn above $21, 240, as of 2023. In the year you reach full retirement age (which is 67 for those born in 1960 and later), anything you earn above $56,522 will be reduced by $1 for every $3.

However, those reductions will stop once you reach full retirement age.

The Bottom Line

More people are choosing to continue working part-time after retirement—some because they have to, others because they want to. “The culture is changing,” said Patrick Traverse, an investment advisor representative at MoneyCoach. “More people want to stay active and continue contributing to society. A semi-retirement could be the best of both worlds.”

If you’re interested in a semi-retired lifestyle, you should develop a well-thought-out financial plan first. “For those coming up on retirement plans, I would recommend that they meet with a financial planner sooner rather than later and make sure that they prepare and save the best they can. In speaking with some of the ‘old timers’ who retired before or with me, some of them had to go back to work,” said Zarillo.

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