There are many reasons why someone might pursue part-time work. Perhaps you’re the primary caregiver for a child or an aging family member. Maybe you yourself have a health issue or disability that makes working full time challenging or even dangerous. You could be using that extra time to pursue an education goal or to start your own business. Or maybe you were laid off and just need to bring in some money while you hunt for a new job.
If you do work part time, and especially if you plan to do so for the long term, you may be wondering if retirement is even a possibility. Retirement is no longer a one-size-fits-all proposition. In the past, the typical retirement age was around 65, and people often worked for the same company for their entire careers, earning a steady paycheck and accruing pension benefits.
However, today’s workforce is characterized by greater flexibility and mobility. Many people switch careers multiple times, and job stability is not what it used to be. Leaving the workforce means relying on savings, pensions and Social Security to support yourself during your golden years — all things that working part time can have a big impact on.
Financial Considerations for Part-Time Workers
For any working person, retiring comfortably requires careful planning and financial discipline. That’s even more true for the part-time worker.
“When asked if part-timers can comfortably retire, my instinctive response is: It’s complex, but not impossible. While full-time employees often have the luxury of structured benefits, part-time workers operate in a different sphere. The nuances lie in lifestyle choices, savings strategies and, of course, [your] earnings,” said Alastair Hazell, financial coach and founder of The Calculator Site.
As Hazell points out, your desired retirement lifestyle plays a significant role in determining whether going from part-time work to full retirement is feasible. If you plan to live very frugally in retirement, you won’t need as much in savings. If you have grand travel plans, expensive hobbies or high-cost healthcare needs, you’ll need to account for these expenses in your retirement plan.
Hazell also notes the importance of your saving strategy. With a constrained income, having a comprehensive budget is essential for managing your finances as you work towards retirement. Track your income and expenses to ensure you’re living within your means and are able to put aside adequate funds for retirement.
Hazell’s last point is that your earnings, both as a part-time worker and in retirement, will be critical. Perhaps you can establish other sources of income, such as rental properties, freelance work or a small business. These income streams can help bridge the financial gap and provide added security.
Social Security benefits will also provide a valuable source of income in retirement — but the amount you receive depends on your earnings history and the age at which you start claiming benefits. If your earnings have been lower than most due to working part time, delaying Social Security until your full retirement age or even later can increase your monthly benefit and provide more financial stability during retirement.
How To Save for Retirement as a Part-Time Worker
Generally speaking, saving for retirement is the same regardless of where you get your income or how much you work in a week. The vast majority of financial experts will offer a few universal tips to savers of all kinds.
Having a solid foundation of investments is crucial. As a part-time worker you may not have access to a 401(k) or employer match — but that doesn’t mean you can’t have a retirement account. You can open an Individual Retirement Account (IRA) and still reap tax advantages. For the self-employed part-timer, consider opening a Solo 401(k), as well.
Also, do everything you can to reduce your debt. In particular, pay down high-interest debts like credit cards and loans as quickly as possible. Every dollar you make that doesn’t have to go towards debt frees up more money for retirement savings.
Finally, don’t be afraid to consult with a financial advisor. Maybe you’re not sure how to diversify your investments or need help creating a budget. A professional can help you draw up a financial plan and investment strategy that are aligned with your retirement goals.
Can You Retire Comfortably Working Part Time?
At the end of the day, the answer depends on your individual circumstances, including your financial preparedness, lifestyle choices and retirement goals. To retire with financial security, part-time workers must diligently save, invest wisely and carefully manage their finances.
Ultimately, achieving a comfortable retirement as a part-time worker is possible with proper planning and discipline, but it requires a thoughtful and proactive approach to financial management.