Part-Time and Phased Retirement Paths

Does working part-time in your early 60s actually move the needle, or is it just a soft landing? It moves the needle more than almost anything else you can do, because even modest income in the first years of retirement attacks the single biggest risk you face. A phased exit isn’t just gentler. It’s often the better financial plan.

Why a little income early matters so much

The most dangerous stretch of a retirement is the beginning. If the market falls hard in your first few years and you’re selling investments to live, you lock in losses you never recover from, which is sequence-of-returns risk. Part-time income is the antidote. Every dollar you earn is a dollar you don’t have to pull from a portfolio that may be down, so you give your investments room to recover instead of selling them at the bottom.

The leverage is bigger than the paycheck looks. Covering even half your spending with part-time work in years one through five can do more for your plan’s durability than the same dollars earned a decade later, because it protects the portfolio at its most fragile moment. See how earned income changes the withdrawal math in part-time income impact on withdrawals.

Forms a phased exit can take

• Cutting back at your current employer, three days a week instead of five. Often keeps you on the group health plan, which can be the cheapest bridge to Medicare there is, see healthcare bridge before Medicare.
• Consulting or contract work in your field, fewer hours, higher rate, more control over your calendar.
• A genuine encore, turning a skill or interest into modest income on your own terms.

The part most people miss

Most people frame part-time work as money, and miss two second-order effects that cut in opposite directions.

The good one: purpose. The hardest part of retirement for a lot of high-achievers isn’t the budget, it’s the Tuesday morning with nothing on it. Phased work keeps structure, identity, and people in your life while you figure out what’s next. Money is just a tool to buy time, and time you don’t know what to do with isn’t worth much.

The watch-out: if you claim Social Security before your full retirement age and keep earning, the earnings test temporarily withholds part of your benefit above an income limit. It’s not lost forever, your benefit is recomputed later, but it’s a surprise if you didn’t plan for it, and it’s a reason to coordinate part-time income with your claiming date. Social Security at 62 vs. 70 covers the interaction.

If your accounts are large

When you don’t need the income at all, the calculus flips from necessity to deliberate strategy, and the move is to keep your reported income low on purpose. These early years are your prime window for Roth conversions at low rates before RMDs begin, so heavy part-time earnings can actually work against you by crowding out cheap conversion space and even nudging your IRMAA tier. For these households I’d treat part-time work as something you do because it’s meaningful, then build the tax plan around it. Ease out if it suits you. Just know that the early paycheck is quietly protecting your portfolio when it’s most exposed.