The case for working part-time
Updated: Nov 3
Retirement can feel like an "all-or-nothing" decision. As a result, preparing for retirement not only means being ready financially, but embracing a new way of life. For some people, this can be overwhelming. Many career-oriented people have grown accustomed to molding the rest of their lives around work. And while work can be fulfilling by itself, it sometimes means that other priorities (hobbies, travel, and time with friends) have taken a backseat. Take work away, and you're left with a bit of a vacuum.
It's easy to relate to that predicament. Sometimes we have neglected our hobbies long enough that we are at a loss for what we even enjoy any more. When people ask us, "what do you do for fun?" the honest answer is, "I don't know."
In that situation, it's not so much that we look forward to retirement as that we look forward to a break from working.
In an ideal world, we wouldn't just be excited to stop working, we'd actually have a positive vision to move towards. We'd have hobbies, friendships, and adventures that we can't wait to enjoy.
This brings me back to my original point. A great life doesn't just happen overnight. Often, the most rewarding experiences take the most time to grow into. Suppose you sign up for dance lessons at the local community college. It might take months to get halfway decent at it, but somewhere along the way you might find that you love to dance.
Finding and nurturing hobbies takes time. That's where scaling back your workweek comes into play. Imagine if you had an extra night or two each week where you felt fully rested, your household chores were done, and you could do whatever you wanted. Rather than work five days on two days off, you could be enjoying four day weekends every week. Heck, you could enjoy five days off, with two days on.
If you're only working two days a week, you might even find yourself looking forward to work. Here's a place to see some familiar faces, use your brain, and help people. That sounds like a fun place to be. Maybe you don't want to be there every day, but the good news is you don't have to! It's up to you.
Over the course of a year, you'll have many opportunities to tinker with your life design. You can sleep in, get up early, go for bike rides on Saturdays, cook at home, take a dance class, go out with friends, play golf and tennis.... You can even try doing nothing!
With time, maybe less than a year, you could find yourself with some fun hobbies, new friendships, and a renewed relationship with your work. All of which can happen while simultaneously strengthening your "full time" retirement later on.
I've talked a lot about why this works from a "life design" perspective, but I haven't really touched on the financial side. Details will vary, but there are two main reasons this works out.
First, each year you delay retirement is another year your money can keep growing.
Second, each year you delay retirement is one less year that you'll have to cover with your nest egg.
Here's what this looks like in practice.
For a 60 year old, the first 5 years of retirement are the most expensive. They have 5 years until Medicare kicks in, and typically aren't receiving any income from Social Security. As a result, they have to buy their own health insurance, and don't have any income to help with the added expenses. Moreover, if you retire today at age 60, your money doesn't have any extra time to grow. The money has to come out now.
Mathematically, this is also the most perilous period for your portfolio. The worst scenario for a retiree is one in which you get poor returns early in retirement, coupled with those high expenses early on. That is a recipe for portfolio depletion.
There are various antidotes to that risk, but few are as good as working part-time. Poor returns don't matter nearly as much if you aren't taking the money out yet. Moreover, times when the market has had a bad few years are often followed by several very good years. Giving your investments more time to work has historically led to a much higher chance of good investment returns. Too, each extra year of good returns contributes further growth to your nest egg.
To summarize, working part time gives you a chance to create a great life for yourself, even before retiring. It allows you to start living more fully, today. On the financial side, putting off portfolio withdrawals gives your nest egg more time to grow and ultimately means that your portfolio has fewer years of living expenses to cover in retirement.