More Pre-Retirees Are Choosing Semi-Retirement. 5 Decisions That Determine Whether It Works

Working less instead of stopping altogether can make savings last longer. But overlooking a key deadline can also create a permanent cost.

Only 21% of people nearing retirement imagine retirement as the moment they quit work completely, according to an F&G Annuities & Life survey of 2,001 adults age 50 and older who have at least $100,000 to invest. Much more, 51%, say they plan to semi-retire.

Bringing in a smaller paycheck can help savings grow for more years. It can also run into rules designed for people who are either still working or fully retired, with very little in between.

Social Security, Medicare and the IRS each handle part-time work differently from full-time work, and those differences can show up in the first year you cut back.

1. Secure health coverage before reducing your hours

Most part-time jobs do not include health insurance. In March 2026, only 23% of part-time workers in private industry had access to employer medical coverage, compared with 87% of full-time workers.

Before age 65, that usually means checking the cost of a marketplace plan or a spouse’s employer coverage before you give notice, not after.

At 65, the stakes are even higher. Medicare allows people to postpone Part B without a penalty if they have group health insurance through their own job or a spouse’s current job. A part-time position without health benefits does not qualify.

If you miss the enrollment window, Medicare adds a 10% surcharge to the Part B premium for each full 12-month period you could have enrolled but did not, and that extra cost generally stays with you as long as you have Part B.

It is smart to mark the Medicare enrollment windows on your calendar during the year before you turn 65.

2. Recheck the Social Security numbers against your new income

If you claim benefits before full retirement age while still working, the earnings test applies. In 2027, Social Security will withhold $1 for every $2 earned above $25,560. In the calendar year you reach full retirement age, the limit increases to $67,920 and the withholding changes to $1 for every $3, counting only earnings before the month of your birthday.

A part-time job that pays $35,600 in 2027 would put someone $10,040 over the lower limit, which would mean roughly $5,020 in withheld benefits.

That money is not gone. Social Security recalculates the benefit at full retirement age to account for the months it withheld, but the cash-flow squeeze happens now and can interrupt checks for months.

The upside matters too. Part-time income can cover expenses while you wait to claim benefits. After full retirement age, each year you delay increases the benefit by 8% until age 70, and the earnings test no longer applies.

3. Use the paycheck to pay expenses and leave savings untouched

Every month that part-time work covers groceries and utilities is a month you do not need to sell investments. That is especially important early in retirement, when selling during a market downturn locks in losses on money that no longer has time to recover.

A paycheck can also keep you eligible to make new contributions. The IRS does not impose an age limit on IRA contributions as long as you have taxable compensation. For 2026, the limit is $7,500, or $8,600 for people 50 and older, or your earned income if that is lower. A modest job can be enough to fund a full-year contribution.

4. Be ready for your tax picture to shift

To figure out how much of your Social Security benefit is taxable, the IRS counts half of your benefits plus your other income, including wages. For a single filer, once income rises above $25,000, and for a married couple filing jointly, above $32,000, part of the benefit can become taxable. Above $34,000 or $44,000, as much as 85% can be taxed.

A part-time job can move benefits that were previously tax-free into the taxable column, and no federal tax is withheld from benefits unless you request it. Social Security can withhold federal tax if you submit Form W-4V, which can help prevent an unexpected bill in April.

5. Plan the sequence before you scale back

Semi-retirement layers decisions on top of each other: when to claim benefits, which accounts to tap first, whether lower-income years are a good time for Roth conversions and how long the part-time phase will last.

The F&G survey found that 52% of those considering or postponing retirement worry they will not have enough money, and 75% of all respondents prefer dependable income even if it limits growth.

A fiduciary advisor can compare those scenarios side by side. If you have $100,000 or more invested, SmartAsset can match you with up to three fiduciary advisors at no cost and with no obligation, and nearly all offer a free first meeting.

SmartAsset handles the matching process and does not provide advice itself. The questionnaire takes about 10 minutes, asks for a phone number near the end, and lets you decide whether and when to reply to anyone.

Half retired, fully prepared

The survey found that 60% of pre-retirees view retirement as a gradual transition. Even a gradual transition still includes important dates: the month you turn 65, the year you reach full retirement age and the April tax deadline after your first part-time year. Put those on the calendar before you tell your boss you want Fridays off.