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What Is Semi-Retirement?
Whether you love your job or don’t have a enough savings to leave the workforce entirely, semi-retirement could be a good option for you.
Semi-retirement is a phenomenon where people continue to work part-time in retirement. This could look like scaling back hours at a full-time job or quitting your current role to work part-time or freelance instead.
Some people may opt for semi-retirement out of financial necessity, while others may have a desire to keep working because they enjoy their jobs and find meaning and purpose in their careers.
Key Takeaways
- During semi-retirement, retirees work part-time instead of fully retiring. This may be driven by financial needs or a desire to continue to work.
- Although semi-retirement offers financial perks, it can help support well-being by giving retirees structure and social connection.
- Before choosing semi-retirement, consider its potential impact on taxes, Social Security benefits, and healthcare coverage.
The Financial Benefits of Semi-Retirement
While you may earn less in semi-retirement than in full-time work, the added income can help you build a larger nest egg and potentially delay collecting Social Security benefits.
For example, you can take advantage of semi-retirement by contributing to your retirement accounts, since part-time workers are eligible to contribute to individual retirement accounts (IRAs). Plus, workers age 50 or older can make catch-up contributions. In 2025, the catch-up contribution for older workers is $1,000, making the total contribution limit $8,000 for these workers.
And if you keep your existing job and are still eligible for a 401(k), older workers can make catch-up contributions to their 401(k)s, too. In 2025, workers aged 50 or older can contribute an additional $7,500. For those aged 60 to 63, the limit is even higher at $11,500.
Additionally, working longer may allow you to put off collecting Social Security benefits, which can be helpful if you want to receive larger monthly checks and anticipate a longer life expectancy.
Beyond the financial benefits, some retirees find psychological value in continuing to work.
Semi-Retirement Could Improve Your Wellbeing
When Carolyn McClanahan, CFP and founder of Life Planning Partners, works with clients to draft their retirement plan, she encourages them to think about how they’ll spend their time—and with whom.
“Before people retire, like within five years of retirement, we start having conversations with people about what they’re going to be doing in retirement,” she said.
For some of her clients, reducing their work hours instead of abruptly quitting makes them more likely to have a successful retirement.
Some research has found that losing a job-related identity and leaving behind a social network at work can be risk factors for depression, potentially causing lower life satisfaction and loneliness.
“Money aside, that [working part-time] is just another way that retirees can find purpose,” said Ben Loughery, CFP and founder of Lock Wealth Management.
However, Teresa Ghilarducci, a labor economist and professor at the New School, has noted that working longer may only be beneficial for a select group of people.
“My research showed that work was good for the types of people who make pension policies, like politicians and professors. But they have jobs with status where they can control the pace and content of their work,” Ghilarducci told Investopedia in a 2024 interview. “For people who don’t, data shows their stress and cortisol levels are higher. For most people, their job doesn’t provide meaning, satisfaction, or personal growth.”
How to Decide If Semi-Retirement Is Right for You
To determine if semi-retirement is the right decision for you, you’ll want to figure out whether you’re doing it out of choice or necessity.
If you want to work longer because you can’t afford to retire, you’ll want get a complete picture of your finances to calculate the gap in savings you’ll need to make up. You may want to ask yourself the following questions: How large is the gap in savings? How much longer will I need to work to cover the gap in savings?
Loughery notes that semi-retirement can also be a good option for those who already have savings, but still want to bolster their nest egg.
“What if there’s some bad market environment or some unexpected life event that comes up? It’s nice to have the buffer of extra income because [then] we’re not tapping fully into the portfolio for withdrawals and we’re also allowing ourselves to extend [waiting to collect] Social Security,” said Loughery.
For those opting for semi-retirement out of choice, you’ll have more flexibility than your peers who must work out of necessity. This means that you can choose the terms of your semi-retirement without having to worry about finances.
For example, you may want to reduce the workload in your current role or take up a passion project, like selling handmade goods online or becoming a freelance writer.
Factors to Weigh When Considering Semi-Retirement
Before semi-retiring, you’ll also want to think about how part-time or contract work could potentially impact your tax brackets, Social Security benefits, and healthcare options.
Tax Brackets
If you plan to pull money from your retirement savings while you’re still earning money on the side, you’ll want to look into how this could impact your tax brackets, as your extra income could end up pushing you into a higher tax bracket. Pay close attention to the income tax brackets, your withdrawal amount, and your income.
Social Security
While opting for part-time work may allow you to hold off on collecting Social Security benefits, those who decide to take benefits before full retirement age (FRA) and continue to work may be at risk of having their benefits reduced.
If you’re bellow FRA and earn income, your benefit will be reduced by $1 for every $2 you earn above the annual limit of $23,400 in 2025. Once you reach FRA, your benefit will be recalculated and the benefits that were withheld will be credited back to you.
Healthcare
People who stay at their current job may still be able to rely on health insurance through their employer. However, retirees under the age of 65 who decide to quit their jobs may have to purchase a health insurance plan off the exchange, as you must be at least age 65 (or have certain chronic medical conditions) to qualify for Medicare.
Tip
Be aware of your income before you become eligible for Medicare. Some Medicare premiums (Medicare Part B and Medicare prescription drug coverage) are determined by your tax return from the previous year. For 2025, your Medicare premiums would be based on your income from 2023.
The Bottom Line
Semi-retirement provides flexible path for those who need or want to keep working. Working part-time can help you grow your nest egg, delay collecting Social Security, and ease the transition into retirement. Just make sure to think about how it might impact your taxes and healthcare options.
