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Have you ever heard the expression “hobby job?” I have seen the expression most recently on a LinkedIn profile. I think I understood, but called our accountant to ask about it’s meaning. He explained in tax terminology; there is no such thing as a “hobby job.” You are employed or you are not employed. You might be employed part-time, full-time or self-employed. (Bear in mind is you incur net losses in self employment you could be subject to hobby loss rules.) I have started to realize why someone who retired at a younger age might choose not to entirely withdraw from the work force.
Decades ago, I recall meeting a fellow who retired from the board of education in a major city as a department head. Teachers can have great retirement plans. He moved to a state in New England. As he made connections in his small town, a school official asked if he might be interested in a job as a crossing guard. As the story goes, the fellow felt he was being insulted! I think the school official was attempting to do him a favor. This would be an easy way for him to get into the school district’s benefits and pension programs, which were likely very generous.
Most of us tend to think getting older is bad. Parts wear out. You might lose your hair. Staying youthful has kept the cosmetics industry in business for years! There is at least one very good reason for getting older: Once you hit age 65, you can apply for Medicare coverage! Until you hit that threshold, you are responsible for paying for your own health insurance. This often goes up faster than the rate of inflation.
If you retired in your 50’s and take on a part time job, you will likely get coverage from your firm’s medical plan. This can be a significant saving, compared to paying for your own coverage. The part time job also keeps you busy, easing your transition into retirement.
What about retirement plan contributions? If you have plenty of assets and low overhead expenses, you might direct as much money as possible into retirement savings. The 2025 threshold for IRA contributions is $7,000. If you are over age 50, you can add an additional $1,000 as a catch up contribution.1
There can be plenty of other employee benefits that can work to your advantage:
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Health Savings Accounts. You may be able to direct pre tax dollars, for use with medical bills later;
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Dental insurance. Some employers offer a dental plan in addition to their health plan.
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Group life insurance. This might only apply while you are employed by the firm, but it would likely be more expensive to get otherwise.
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Wellness programs. This might include a gym membership. This can be helpful until you reach age 65 and qualify for the Silver Sneakers program.
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Employee discounts. The value depends on the firm where you work. Obviously, if you worked for a hotel, car dealerships, airline or a restaurant group, the cash value of the benefit can be substantial.
There are many reasons a person who left the workforce in the 50’s might choose to take on part time work, even if it’s in an unrelated field, to take advantage of benefits they would be paying for otherwise.
Related: What Would Your Client Do if They Did Not Need To Work?