When deciding on future retirement goals, while some retirees dream of full-time leisure, others find fulfilment and financial benefits in part-time work. But is it the right choice for you? It’s surprising how many people continue working beyond retirement age. It’s essential to weigh the benefits and disadvantages of working part-time in retirement to understand if it’s the right option.
It’s estimated that around 3% of people over 50 had considered returning to full-time work, while 14% pursued part-time or seasonal work. There are several reasons that individuals decide to return to work, both personal and financial – but could any of these reasons resonate with you?
Pros
Increase your income
Not everyone can immediately stop working when they reach retirement age, so many people choose to continue working to supplement their income beyond what their pension offers. This often leads to options like part-time work, which allows individuals more free time to pursue personal interests, or full-time jobs to improve their financial situation.
Carry on doing what you enjoy
Just because you’ve retired, it doesn’t stop there. Why not continue the work you enjoy? No one forces you to hand in your P45 when reaching retirement age! The extra income from your pension may allow you to reduce your hours or work more flexibly, but that is entirely up to you. Everyone is different, and choosing what is best for you is important.
No NI (National Insurance) to pay!
Whether you already know it or not, it’s essential to understand that once you retire, you will stop paying National Insurance once you reach pension age! So, let’s say you decide to carry on working. That’s extra money in your pocket each month.
Stay active and social
So, once you retire, you may feel you have lost a sense of purpose and fulfilment. Not to mention that you are no longer socialising as you may do while working, just like small interactions such as speaking with colleagues. This can be a big adjustment to your lifestyle change and overall routine.
Look forward to a bigger pension
If you keep working and delay taking your pension, you can invest in your retirement, meaning you will be financially better off in the long run! When you eventually take your pension upon stopping work, your pension income could be significantly higher than if you had started receiving it immediately.
Cons
Less free time and potential stress
Working during retirement can reduce the free time available for hobbies, passions, or other commitments such as caring for grandchildren or volunteering. While easing into part-time work can be a good transition, it’s essential to consider whether the additional workload might add stress or take away from activities you enjoy. Additionally, your tax benefits may be affected if you’re withdrawing funds from one pension while contributing to another.
Risk of higher taxes
If you start claiming your pension while working, your additional earnings could push you into a higher tax bracket. This applies even if you are working part-time or reducing your hours. While one advantage is that you won’t have to pay National Insurance (NI) once you reach state pension age, claiming any pensions may increase your taxable income, which could lead to a rise in the amount of income tax you owe.
Commuting expenses
If you decide to work during retirement, it’s important to consider the costs of commuting to and from your workplace, as these expenses could impact your earnings. A bus, train ticket, or driving 20-30 minutes each way may seem manageable, but these costs can add up over time. Whether you’re working part-time or full-time, the additional income you anticipated may not be as effective as you hoped.
If you plan to work part-time to stay active, commuting costs might not be as significant. Additionally, reducing the number of days you work can help minimise your travel expenses, so it ultimately depends on your circumstances.
Final Thoughts
Ultimately, there are pros and cons to working part-time while in retirement or approaching it, but it is down to the person and your goals and visions for your ideal retirement.
The key question is, does it align with your retirement goals? If you’re nearing retirement and unsure of the right approach, consider seeking financial advice to help guide you in the right direction!
