People work for several decades to build up a good nest egg, but retiring too early can put you in a financial bind in your late years. The new “unretiring” trend highlights the risks of retiring too early. A recent T. Rowe Price study on retirement planning concluded that “roughly half (48%) of those working in retirement felt they needed to work for financial reasons.”
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The rising cost of living has made it more difficult for people to achieve a traditional retirement. However, alternatives exist. It’s possible to transition from a full-time job to part-time work or side hustles before retiring. That way, you have more flexibility, but some cash is still coming into your bank account each month.
These are some of the ways to make the jump from a full-time job to a side gig.
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Calculate Your Monthly Living Expenses
When you transition from a full-time job to a part-time job, you still have to cover basic expenses like housing and groceries. These living expenses should serve as a compass when considering part-time opportunities. While you may have to cut some of your non-essential costs, your part-time salary should still be enough to cover the necessities.
It’s also important to consider which expenses you want to keep when you make the transition to a side gig or a part-time position. While golf outings aren’t essential, some people don’t want to forgo that activity during retirement. Aspiring retirees should consider what they can live without, and what non-essential expenses are important parts of their lives.
Start Working on the Side Gig Now
If you’re considering a jump from a full-time job to a side hustle, you should start working on the side hustle while you are employed. While you’ll have a tighter schedule, you can experiment with side gigs while having a financial safety net.
For instance, you may discover that Uber driving isn’t for you after a few weeks. It’s better to figure this out while you still have a job, instead of learning this fact after you leave your traditional career behind. Working on side gigs at a limited capacity allows you to sample different income opportunities. Some people build side hustles that end up replacing their full-time income, making it easier to take the leap.
Pick Side Gigs with Higher Income Potential
Some side gigs have more potential than others. While Uber and DoorDash have limited growth opportunities, some side gigs like writing, video editing, and social media management can pay well.
Notably, each of those side hustles allows you to work remotely. Many people want to work from home, but it becomes more important as you get older. That’s because physical labor and regular commutes can become more challenging as people approach their retirement years.
You can develop the necessary skills while at your full-time job so you can work on promising side hustles. However, you should only work on a side gig that you enjoy. There’s no point in managing other people’s social media accounts if you don’t enjoy the work.
Work Toward a Savings Goal
Not every transition from full-time to part-time work is smooth, but building an emergency fund can help you prepare for the unexpected. Many experts recommend having 6-12 months of living expenses saved up before leaving a job.
If your living expenses come to $3,000 per month, you should save up at least $18,000 before making the switch. Giving yourself more of a financial buffer will help even more. Aspiring retirees should continue to max out their retirement accounts if they can, as there may be a day when they can no longer work.
Consider Downsizing
When you leave your job, you’ll end up making less money each month. While a part-time job can mitigate this effect, downsizing is also beneficial. While the most apparent benefit is lower mortgage payments, downsizing offers additional financial benefits, as The Yale Ledger explained.
“Downsizing can lead to substantial savings on property taxes, utility bills, and home maintenance costs. Smaller homes generally incur lower heating, cooling, and electricity expenses, and the costs for repairs and upkeep are typically less due to the reduced square footage. These savings can accumulate over time, allowing you [to] save more and enjoy a more manageable financial situation.”
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This article originally appeared on GOBankingRates.com: 5 Ways To Transition From a Job to A Side Gig Before Retirement
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