I Love Part-Time Work so How do I Plan for Retirement?

Work. Even though we know we have to work until we are financially independent, many of us have a love-hate relationship with it.

We love the money we earn, but we aren’t always thrilled with our jobs or how much of our lives revolve around work.

The description of a “traditional” career has changed over the last few decades. It’s become rare for people to work at the same employer throughout their career.

Gone are the days where most people can depend on their employer to provide them with pensions and lifetime benefits.

The modern economy allows people to get much more creative in generating income.

Many still work full-time jobs and may even supplement with part-time jobs, contract work, or side hustles.

Others build businesses while still working full-time or job-sharing.

People may blend an income from two part-time jobs together or pair working part-time with an entrepreneurial venture to make a full-time salary.

Still, others choose just to simply work part-time.

They may earn less money but appreciate the chance to design a lifestyle with a better work-life balance.

Working part-time towards retirement might be exactly what you want to do.

But how can achieving a better balance in life now affect your financial future? (Other than the obvious point that you wouldn’t be earning as much as you could working full-time.) Read on to find out.

Live For Now But Plan For Later

Unless you have significant savings, you’ve always worked part-time, or you found a way to reduce your expenses significantly – fewer hours of work will likely force you to tighten your budget.

Many who choose part-time work agree that having more free time is worth a more frugal lifestyle. But that’s also short-term thinking.

When you make less money, reducing your spending may help you pay your bills – but will it allow you to save money and invest for your retirement years?

When part-time work is your long-term plan, it’s important to look to the future. Far into the future.

Otherwise, the lifestyle you’re seeking now could disappear if you haven’t saved enough to fund your retirement years.

Taking some of that extra “free time” and being proactive when you first start working part-time is key. You should thoroughly understand your financial situation and how part-time work will impact your retirement.

Perks Many Part-Timers Miss Out On

If you work part-time, you might love your schedule. The flexibility and the control you have over more hours each day is what you’ve been looking forward to.

You don’t miss the stress of full-time work. And you get to pursue more creative or wellness activities which make you feel even better!

Can the reduced stress now become stress later in life? Definitely.

Besides giving up a bigger paycheck, part-timers may give up access to important and expensive insurance policies.

Having to pay for health insurance and life insurance when your employer paid for the majority of the premiums can really set you back financially.

Some employers even provide a level of disability insurance. And remember, you are more likely to become disabled than die during your working years.

Paying for disability insurance in addition to all of your other bills may be very difficult as a part-time earner.

Part-time workers may also lack access to an employer-based 401k plan and employer contributions to retirement plans.

There’s no “free money” match to your contributions if you don’t have an employer providing that benefit.

You might also miss out on other employee benefits you’ve forgotten about.

You need to plan how you’ll make up the difference if you lose your subsidized fitness center membership or the reduced cost travel options you had with full-time work.

These are just a few things part-time employees have to consider. Paying out of pocket instead of using employer benefits and perks might affect your long-term saving and investing goals.

If you realize you can’t pay for important things like insurance policies or you are going to go into debt because of working part-time, it may not make sense as a long-term plan.

How Part-Time Workers Can Prepare for the Future

If you’ll be working part-time, there are plenty of things you can do to plan for retirement proactively.

1. One of the most important things you can do is track your expenses carefully and use a budget. By using financial programs like Personal Capital, Tiller, and YNAB, you’ll be able to follow your net worth over time while monitoring your budget from month to month. With a smaller income, just guessing what you spend may allow you to keep paying your bills but not save for emergencies or invest regularly for retirement.
2. If you are a part-time W-2 employee, check to see if your employer offers any benefits that you can take advantage of. Some employers don’t, but others have found offering even limited benefits helps retain good employees. Check out this list of employers who provide a wide variety of benefits to part-time workers. Any benefits you can use should help put money back in your budget!
3. If you don’t get employee benefits, look at other options. If you are a member of a warehouse club like Costco, you may have discounts you’ve never considered. Are you a member of a professional organization? Your membership may allow you to access benefits no one talks about because they are still working full-time and have employee benefits.
4. Invest in yourself and learn about retirement account options for part-time workers. Your choices may change based on how you are earning your income but don’t wait to take action. Part-time workers have to make saving for the future a priority. The longer you wait, the less time your money has to compound. Your future self will thank you for taking action and investing as early as possible.
5. Some people don’t include Social Security when they plan for retirement because they believe it will no longer exist. It’s important to consider it may be reduced according to the Social Security Administration, but benefits will likely be paid for many years to come. Make sure you have a clear understanding of how a reduced income from working part-time will affect the amount you receive each month. Since your basic benefit is based on the 35 years in which you earned the most, an extended period of lower part-time earnings will result in lower Social Security payments. Delaying taking Social Security until you can receive your full benefit is a smart way to maximize your payments and help offset a lower income during your earning years.

Working Part-Time Towards Retirement

If you’ve chosen part-time work and have a reduced income, ensure you take care of your future self.

It’s easy to say you will “get to it later” when it comes to saving for retirement. So create a plan and monitor your progress and you’ll see if you are getting off course.

Don’t rely on being able to work part-time in your retirement years either. It’s nice to be able to do that if it is your choice, but as you age – the chance of illness or injury preventing you from working goes up.

Planning to work in your 60’s and beyond shouldn’t be your only plan.

Part-time workers can enjoy a wonderful retirement if they’ve put in retirement planning time early on, if they monitor their plan, and commit to investing for their future.

It may be like another job as you get started, but working for yourself is the best kind of work you can do!

Next: Financial Planning: what, why, and how to create a financial plan

By Women Who Money Co-Founders, Vicki Cook and Amy Blacklock

Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.