By Cheryl Winokur Munk
Oct. 15, 2024
For many seniors, retirement is an opportunity to kick back, relax—and find a side hustle.
These part-time jobs are for people who aren’t up for an 80-hour workweek, but who would enjoy earning some cash by devoting a few hours a day, week, or month to something they enjoy.
Dreamstime
According to a recent poll of 3,000 retirees by MarketBeat.com, seniors with side hustles earn an average of $379 a month. And they’re doing it for multiple reasons. Forty-seven percent said it was to supplement retirement income, 34% cited staying mentally engaged and active; 10% said it helped them pursue a passion or hobby and 9% cited the ability to meet new people and build social connections.
“People need a purpose,” says John Jones, an investment advisor at Heritage Financial in Newberry, Fla. “They need a reason to get up and put their boots on in the morning.”
Here are five steps to navigating side hustles in retirement years that are recommended by financial advisors.
Devote plenty of time to preplanning. Some people know from the get-go they need to work in retirement to supplement their income. Others look ahead to retirement and realize they’ll have a lot of free time and might want a job to fill some of it.
When possible, advisors recommend clients map out their retirement around five to 10 years before they expect to leave the workforce full-time. Proper planning can prevent money and boredom issues from cropping up later on. “Sometimes they pull the ripcord and jump out of the plane” when they really can’t afford to, says Scott J. Metzner, founding partner of Optimus Financial, a division of Stifel Independent Advisors, in Port Huron, Mich.
Go through the nitty-gritty. Advisors can help clients map out the details of a potential return to work. Do they need a full-time job or a part-time job? Or do they want a full-time job that is on a seasonal basis only?
How much income do they need? How much stress are they willing to take on? What does part-time mean to them? Do they need a job with benefits? Are they pre-Medicare and in need of healthcare benefits? “These are serious questions we have to go through,” says Stuart Sprenger, a senior wealth advisor with Citi Personal Wealth Management in Fresno, Calif.
Pick a job you’ll enjoy. John C. Anderson, a financial consultant with Equitable Advisors in Oak Brook, Ill., has retired clients who want or need to go back to work, but don’t know what they want to do. He suggests clients start by finding something they have an affinity for and then he helps them brainstorm. For instance, he might mention the possibility of dog-walking or pet-sitting to clients who are animal lovers. For clients who are sports enthusiasts, he might suggest refereeing youth sporting events.
“If you do something you enjoy, you never work a day in your life,” Jones says. He has a client in his mid-60s who enjoys golfing so he has decided to work as an instructor a few days a week. He had enough money to sustain his lifestyle in retirement, but boredom set in, and he needed something to keep him occupied. “It keeps him young because he has something to do,” Jones says.
Consider the impact on Social Security and taxes. A job in retirement could have tax implications. For example, there are limits on how much people who start taking Social Security benefits before their full retirement age can earn without impacting their benefits. People also want to be careful not to bump themselves up into the next tax bracket, especially if they’re taking required minimum distributions, or RMDs, Jones says.
Jennifer Kohlbacher, director of wealth strategy at Mariner in Tulsa, Oka., works with a retired doctor in his early 60s who consults with medical practices on practice-management-related issues. When he mentioned this as a possible side hustle, she helped him model the finances, so he could see the impact on his income and expenses, based on how long he thought he might continue the side gig.
Kohlbacher also spoke to the client about how to structure his business, which they determined should be a single-member LLC to protect his personal assets from debts or liabilities incurred by the company. They discussed his potential expenses and the importance of tracking items like supplies, cellphones, and mileage. And they explored opening a self-retirement plan to set aside additional money on a tax-deferred basis.
Working can be a way to make retirement savings last longer. Joshua Vaughan, senior associate at Atlanta-based Homrich Berg, works with a retired executive who is consulting to minimize what has to draw from his individual retirement account (IRA). This allows him to continue growing the account tax-deferred and potentially pass on a greater portion of the IRA to his heirs.
Adjust, as necessary. Sometimes the unexpected happens, and best-laid plans can need adjusting. Nicholas Yeomans, president and chief compliance officer of Yeomans Consulting Group in Marietta, Ga., had a retired client in his 60s who decided to go back to work to supplement the family income so his wife could retire and help care for a grandchild with special needs.
The wife had been planning to work a few more years, but the grandchild’s birth changed those plans. The husband, who had already been thinking about a part-time job to keep himself busy, mentioned the idea of becoming a delivery driver for an auto parts company. Yeomans crunched the numbers with the couple and determined that between his part-time job and their retirement distributions, the wife could afford to retire.
Re-evaluate yearly to make sure you’re on the right path. It isn’t a one-and-done conversation, Kohlbacher says. She meets with clients—at least yearly—to discuss their side job, the financials, and how things are going more broadly.
Was it enough work or not enough, for example, from a financial and emotional vantage point? “It isn’t just numbers,” she says.
This Barron's article was legally licensed by AdvisorStream.
Dow Jones & Company, Inc.
