Does Working Part-Time in Retirement Actually Help? What the Numbers Show

Why Does a Small Amount of Part-Time Income Have Such a Big Impact?

Sequence-of-returns risk is highest in the first 5-10 years of retirement. Every dollar you withdraw during a market downturn is a dollar that can't recover. Part-time income reduces early withdrawals, giving your portfolio a buffer during the most vulnerable period.

The math: $25,000/year for 5 years = $125,000 less withdrawn from the portfolio. At 7% average return, that $125,000 grows to approximately $490,000 over 20 years. That's nearly $500,000 more in your portfolio at age 85 — from $125,000 in part-time earnings.

The Monte Carlo simulation captures this perfectly. A scenario with $25,000/year part-time income for 5 years shows success rates 12-18 percentage points higher than the same person with no part-time income.

What About the Social Security Earnings Test?

If you claim Social Security before Full Retirement Age while working, the earnings test reduces benefits: $1 withheld for every $2 earned above $22,320 (2025). In the year you reach FRA, the threshold is higher and the reduction is $1 for every $3 above a higher limit.

Important: benefits withheld are not lost — they're added back to your benefit at FRA, effectively increasing future monthly payments. The earnings test is a deferral, not a penalty.

This creates a counterintuitive strategy: if you plan to work part-time in early retirement, it may make sense to delay Social Security claiming. Working + claiming early means reduced checks now. Working + delaying means higher checks later when you stop working.

What Types of Part-Time Work Make the Most Financial Sense?

From a financial analysis perspective, the optimal part-time work:

1. Provides health insurance (eliminates the most expensive pre-Medicare cost) 2. Doesn't trigger IRMAA surcharges (keep total income below thresholds) 3. Preserves ACA subsidy eligibility (if pre-65 and no employer coverage) 4. Contributes to Social Security earnings record (if you have fewer than 35 highest-earning years) 5. Allows continued retirement account contributions (401(k) at a new employer, or IRA)

Consulting in your previous field typically offers the best income-to-hours ratio. Teaching, nonprofit board work, or seasonal employment can provide purpose alongside income.

Want to Model Part-Time Income in Your Plan?

The analysis at myaifinancialplan.com models part-time income as a configurable income stream in your retirement projection — showing the impact on success rate, withdrawal needs, and tax picture. Start free at myaifinancialplan.com.