- Personal Finance
Part-Time Jobs for Retirees
Taking a part-time job is a great way to supplement retirement income. The obvious financial benefit is the paycheck. If a retiree works 15 hours per week at $10 per hour, he’ll earn $6000/year for 40 weeks of work (still leaving a generous 12 weeks/year for holidays and vacations … this is, after all, retirement). Earning the equivalent amount in annual interest from 5-year certificates of deposit at today’s national average of 1.13% would require an investment of over half a million dollars! So the income from a part-time job can go a long way to making up for any shortfalls in retirement savings in today’s low-interest rate environment. But there are numerous other financial benefits for taking a part-time job:
Employee Discounts. Many part-time employees take advantage of employee discounts, which in some cases can significantly increase the employee’s overall compensation. For example, I recently started a part-time job at a Lowe’s home improvement store and am thus now eligible for Lowe’s 10% employee discount. This discount is valuable since I am a regular Lowe’s customer, and since Lowe’s sells a large variety of products which I regularly purchase. In selecting a part-time employer, it makes sense to look at employers who sell products you normally purchase. For example, people who enjoy reading the latest best sellers should look at Barnes and Noble to take advantage of its 30% employee discount. People who love to golf should consider working as a starter or grounds keeper to get free golfing.
Clearance Sales. Part-time employees may have opportunities to purchase clearance items at extremely low prices. Clearance items may include discontinued items, or products that are fully functional but not in pristine condition. For example, Lowe's often sells discontinued items at clearance prices which are lower than their everyday low prices. As a part-time employee, I have the ability to select from among a wide range of clearance merchandise since I am in the store so often. I also have opportunities to get deep discounts on perfectly good merchandise that cannot be sold at full retain prices simply because their packaging has been damaged.
Medical/Dental/Vision Benefits. While it’s becoming less frequent, some employers still offer medical, dental and/or vision benefits to its part-time employees. Even if the employee is required to pay for all or a significant portion of the costs, the ability to purchase health insurance coverage at group rates can still be attractive. Employers who offer these benefits include grocery stores (Wegman’s, Trader Joe’s, Whole Foods), home improvement stores (Lowe’s), and retailers (JCPenney, Nordstrom, REI). To be eligible for health benefits, part-time employees must typically work a certain number of hours.
Contributions to Retirement Plans. By working part-time, retirees earn taxable compensation that may make them eligible to make contributions to individual retirement accounts (IRAs). In addition, some part-time employees can also contribute a percentage of their wages to an employer-sponsored 401(k) retirement savings account, possibly with their employers matching some or all of their contributions.
Savers Credit. Since part-time employees typically have relatively low incomes, they may receive a federal tax credit if they make eligible contributions to an employer-sponsored retirement plan or IRA. The amount of this credit can be as much as $1000 ($2000 if filing jointly). To receive the Savers Credit, the tax filer must be at least 18 years old, cannot have been a full-time student during the calendar year, and cannot be claimed as a dependent on another person’s tax return. The tax filer’s income must also be below an income limit which depends on his filing status (see the IRS’ website for eligibility criteria).
Earned-Income Credit. Part-time employees may qualify for an earned income tax credit (EITC) when they file their federal income tax return since one of the requirements for the EITC is that the tax filer must have had earned income. Again, see the IRS’ website for information about EITC eligibility rules.
Low (or Zero) Income Tax Rates. Part-time employees typically enjoy low income tax rates on their earnings since they often don’t earn enough money to push them up to a higher income tax rate. In many cases, part-time employees do not need to pay any income tax whatsoever on their earnings!
Social Security Credits. To become eligible for social security retirement benefits, a worker must earn at least 40 social security credits. In 2012, a worker will receive one credit for each $1130 in earnings, up to a maximum of 4 credits per year. Since the earnings needed to earn a credit is relatively low, a part-time employee can easily earn a sufficient income to earn social security credits. These credits can increase the worker’s retirement income and, in some cases, may be the difference between the worker becoming eligible to receive social security retirement benefits and not receiving any benefits at all.
“Free” Training in a New Field. Another benefit of part-time work is that the employee receives “free” training. For example, if a person is contemplating opening a restaurant, he can obtain essentially free training in the food-service field by taking a part-time job in a similar restaurant. After learning how it works, he is then much more likely to succeed when he uses this training to open his own restaurant.
Time to Develop Other Sources of Income. In the real world, most people need a steady source of income to pay the bills. For someone opening a new business or studying to enter a new field, taking a part-time job can buy the time needed to get the new business up and running or to earn his degree.
Entry for a Full-Time Job. In today’s discouraging job market, a part-time job can often be a ticket to getting a full-time job with the same employer. In many ways, the part-time job acts as an extended job interview. The employer gets a good idea of whether the part-time employee would succeed as a full-time employee; the employee gets a good idea of whether he’d like to work full time for that employer.
Savings on Health-Care Costs. Many part-time employees find they get more exercise due to their jobs, or that they enjoy talking to and working with their customers and colleagues. This additional exercise and socializing can actually make the part-time employee healthier, leading to lower health-care costs.
Free Employer-Sponsored Events. Part-time employees are often invited to company-sponsored parties, barbecues, ball games and other social events. This free entertainment can add to the part-time employees’ quality of life at little or no expense.
Decreased Spending on Entertainment. Even part-time employees often find they spend less on their entertainment since they spend little or no money at work, and they have less need to spend money to entertain themselves once work is over. After all, once you’ve gotten up early to put in a six-hour day walking around at work, it’s not a bad idea to simply sit back on the patio and crack open a beer.