Imagine this scenario: Tracey from Philadelphia is going on 62, and while her friends are talking about retirement, she’s not quite ready to walk off into her golden years just yet.
She loves having structure and purpose to her days, as well as the mental challenge of work. Since she’s divorced and her adult children have their own lives, she also looks forward to social interactions at the office. She’s even become an informal mentor to some of the younger employees.
But her health isn’t what it used to be, and she wouldn’t mind having a bit more time to putter around the garden and babysit her grandkids. Plus, she’s tired of the daily commute to work. Yet she isn’t quite ready for retirement, nor does she feel she’s saved enough money to do so.
Ideally, Tracey would like to cut back her hours to part-time work and slowly make the transition to retirement, perhaps over several years. But she’s worried about how that could impact her overall retirement savings, as well as her pension and health insurance.
She’s also worried about how to broach the topic with her boss. She doesn’t want to appear as though she’s no longer committed to her role or the company, nor does she want to be relegated to less important ‘busy work’ until she officially retires. Here’s what she needs to consider, and how she can bring this up at work.
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What to consider before reducing your hours
Reducing your hours or working part-time is an option for older workers who aren’t quite ready for retirement, whether financially or emotionally (or both). For Tracey, part-time work would allow her to stay mentally sharp, continue saving for retirement and gently ease into her golden years.
Some employers may even offer this as an option through partial or phased retirement, so it’s worth checking in with HR.
Retirement savings
Tracey will need to crunch the numbers, perhaps with the help of a financial advisor, to see how a reduced salary would impact retirement savings goals.
Like many Americans, Tracey probably hasn’t met her retirement savings goals just yet. A recent Bankrate survey found that more than half (57%) of Americans (whether working full-time, part-time or temporarily unemployed) feel that they’re behind with their savings for retirement.
For workers 50 and older, there’s the option to make annual catch-up contributions to a 401(k), 403(b) or governmental 457 plans. For 2025, workers can contribute up to an additional $7,500 for a total of $31,000.
If you’re considering going part-time before retirement, you’ll likely have less to put aside in your retirement savings accounts and/or brokerage accounts — and you may not have the extra cash to benefit from catch-up contributions.
Cutting down to part-time can also impact your pension (if you have one). Each pension plan has different rules; for example, some may have a provision for annualizing part-time earnings. So it’s best to talk to the HR department about your options.
If you have a spouse, you’ll also want to discuss how going part-time could impact your shared retirement goals.
Social Security
If Tracey works part-time but still makes enough money to live on, she could potentially delay taking her Social Security benefit until her full retirement age (between age 66 and 67), when she’d receive 100% of her benefit.
But Social Security benefits are calculated based on your 35 highest-earning years. If Tracey earned significantly more in her later career, cutting back her hours now could lower her average and slightly reduce her benefit.
For those considering going part time, the Social Security Administration (SSA) has a number of online tools that can help you crunch the numbers to figure out how reducing your hours could affect your benefits down the road.
Health insurance coverage
Even if Tracey has already met her retirement savings goal and money isn’t really an issue, she’ll still need to consider health insurance. Medicare doesn’t kick in until age 65, and employers are not obligated to provide health insurance part-time employees.
In fact, only a quarter (26%) of part-time workers have employer-sponsored health coverage, according to the Bureau of Labor Statistics.
However, anyone who works 30 hours a week or 130 hours a month is considered a full-time employee by the IRS under the Affordable Care Act (ACA). That means, if Tracey continues to work at least 30 hours a week until she turns 65, she’d still hold onto her employer-sponsored health coverage.
If you find yourself wanting to reduce your work hours but losing health coverage in the process, you can fill out a Marketplace health insurance application to see if you’re eligible for a plan based on your income (or free or low-cost coverage through Medicaid).
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Working it out with your employer
If you’re in a similar position as Tracey and are ready to bring this topic up with your boss, first make sure to research your company’s policies around part-time work. Once you’re as aware of the policies as possible, prepare a proposal.
Proposing part-time work to your employer
The proposal that you bring to your boss should highlight the benefits of this arrangement both for you and for them. You can emphasize how the new arrangement would allow the company to continue to lean on your offerings while also giving you much-needed flexibility.
The proposal should also address any potential concerns. According to career advice from Indeed, “Your supervisor may worry about how the reduction of your work hours might result in a loss of work or impact your colleagues negatively. Try to validate these concerns and offer your supervisor options for overcoming any potential challenge.” For example, perhaps you have institutional knowledge that can help train the next generation of workers.
If you’re able to negotiate part-time work, it’s advisable to sign a new employment agreement (or amend your current one) that outlines the change in hours, pay and benefits.
What to do if your employer says no
It’s possible that, despite a stellar proposal, your boss may not go for it. If that’s the case, there are still a couple of options. You could discuss the possibility of working for the company as a freelance consultant, which gives you control over which projects you take on.
If you can’t negotiate any arrangement with her current employer, you could also consider looking for part-time work elsewhere. This might be a good option for someone who still needs to save for retirement, but finds their current job to be a bad fit.
Easing into retirement through part-time work could give Tracey the best of both worlds: the security and social structure of her job, along with the freedom to start enjoying more personal time. And for anyone in her position, the same holds true. As long as you carefully review the impact on savings, benefits and insurance, and work with your employer on a clear plan, you’ll be better prepared to step confidently into the next chapter of life.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.