Semi-Retirement Planning Guide + Calculator

Semi-retirement is the period between full-time work and full financial independence — working part-time while your portfolio does the rest of the heavy lifting. For most early retirees, it's not a consolation prize. It's a deliberate strategy: reduce the portfolio draw rate to 1–2%, keep employer health insurance, let investments compound, and make a cleaner transition to full retirement on your own terms.

The financial planning is different from both full-time work and full retirement. You're combining a W-2 or self-employment income stream with a portfolio drawdown in a way that interacts with three separate tax cliffs — the ACA subsidy cliff, the Social Security earnings test, and the 0% capital gains window. Getting these right can save $10,000–$25,000 per year compared to an uncoordinated approach.

Semi-Retirement Calculator

Enter your situation. The calculator shows your annual portfolio draw rate during semi-retirement, whether the portfolio grows or shrinks over the period, your full-retirement readiness at the end, and the three coordination flags that determine whether your income structure is tax-optimal.

Three Semi-Retirement Structures

Semi-retirement isn't one thing. The planning differs depending on why and how you're doing it:

Income-supplemented model: You've nearly hit your full FI number and reduce work to a few consulting projects or a part-time role. Portfolio draws cover most of spending; income covers the rest and keeps the draw rate under 2%. Most early retirees in their late 40s and 50s end up here.

Employer-benefits model: Also called Barista FIRE — you specifically take part-time work at a threshold that includes employer health insurance (often 20+ hours/week). Healthcare is the forcing function: the goal is to avoid ACA marketplace premiums ($800–$1,500/month unsubsidized at age 55–64) while the portfolio grows toward full FIRE. The income itself may not fully cover spending, but the insurance value closes the gap.

Coast model: You've hit your Coast FIRE number — enough invested that compound growth alone reaches full FI by your target date. You work part-time to cover current spending, draw nothing (or very little) from the portfolio, and let it compound untouched. This is the lowest-risk semi-retirement structure but requires the most capital up front.

Healthcare in Semi-Retirement

Healthcare is the central planning variable for semi-retirees under 65. Three paths:

Employer plan (best if available): If your part-time employer offers coverage at 20+ hours/week, take it. Employer group premiums for a 50-year-old are typically $200–$400/month for employee-only — vs $800–$1,500/month unsubsidized on the ACA marketplace. It also eliminates the ACA MAGI coordination problem.

ACA marketplace: Available if you don't have qualifying employer coverage. Premium Tax Credits phase out above 400% FPL — $63,840 single / $86,640 for a couple (2026). Under that cliff, a silver plan at age 55 can cost $100–$400/month after subsidies. Above it: $800–$1,500+/month with no subsidy. See the full healthcare guide for MAGI coordination strategy.

COBRA (transition only): After leaving a full-time job, COBRA continues your prior employer's plan for up to 18 months at 102% of the group premium. You have a 60-day election window. Useful as a bridge while evaluating ACA options, but typically expensive — you pay the full group premium rather than the employee-subsidized share.

The ACA subsidy cliff creates an income-management problem unique to semi-retirees: your part-time wages may put you close to the $63,840 limit (single), and every dollar of traditional IRA draw, Roth conversion, or capital gain counts toward MAGI. Tax-efficient withdrawal sequencing matters more here than in full retirement because the wages themselves consume much of your ACA headroom.

The Social Security Earnings Test

If you're between 62 and your Full Retirement Age (67 for anyone born 1960 or later) and collecting Social Security, the earnings test applies: SSA withholds $1 in benefits for every $2 you earn above $24,480/year (2026 limit).¹ At $50,000 in part-time income, that's a $12,760 benefit withholding.

The good news: withheld benefits aren't permanently lost. SSA recalculates your benefit at FRA to credit you for the months your benefit was withheld — so you get higher monthly payments after FRA. But the interaction with ACA MAGI makes most semi-retirees better off simply delaying SS rather than claiming early and managing the earnings test. The break-even math for 62 vs 67 vs 70 claiming ages is in the Social Security timing guide.

Key rule: the earnings test applies only to wages and self-employment income. Portfolio draws (Roth distributions, LTCG, traditional draws) don't count as "earnings" under the test. Investment income does not reduce your SS benefit — but it does count toward ACA MAGI.

Tax Optimization in Semi-Retirement

Semi-retirement offers a tax optimization structure that neither full-time employment nor full retirement provides:

FICA on wages only. The 7.65% Social Security and Medicare payroll tax applies to your part-time wages (up to $184,500 SS wage base in 2026), not to portfolio draws. Shifting income from wages to portfolio draws where possible reduces FICA — though wages also fund future SS benefits and may support employer coverage.

0% capital gains on LTCG draws. If your total taxable income — wages minus the standard deduction — falls below $49,450 (single, 2026 TI threshold), long-term capital gains from your taxable brokerage are federally tax-free. At $35,000 in part-time wages with a $16,100 standard deduction, you have $30,550 in TI — leaving $18,900 of 0% LTCG room before reaching the threshold. Tax-gain harvesting guide.

Roth conversion in the 12% bracket. During semi-retirement, your income is lower than your peak earning years — often creating room to convert traditional IRA to Roth at 10% or 12% marginal rates. The 12% bracket tops out at $50,400 TI (single, 2026). With $35,000 in wages and a $16,100 standard deduction, you're at $18,900 TI — leaving $31,500 of 12% Roth conversion room before crossing into 22%. Roth conversion ladder guide.

ACA MAGI coordination. Traditional IRA draws and Roth conversions both count as MAGI for ACA subsidy purposes. LTCG from a taxable account also counts. Roth IRA distributions do not (contributions and qualified earnings are MAGI-neutral). If your part-time income puts you at $50,000 MAGI and the ACA cliff is $63,840, you have only $13,840 of ACA headroom for all portfolio income — which limits how much you can convert or harvest in any given year.

The four-constraint framework: Every year of semi-retirement, the optimal draw amount sits at the intersection of (1) 12% bracket ceiling, (2) 0% LTCG threshold, (3) ACA cliff, and (4) IRMAA tier-1 ($109,000 single). Part-time wages consume some of this headroom automatically, making the constraint math tighter than in full retirement. Working with a fee-only advisor who understands all four constraints simultaneously can save $15,000–$30,000/year in avoidable taxes and lost subsidies.

Transitioning from Semi-Retirement to Full Retirement

The trigger for full retirement should be financial, not arbitrary. Three signals that you're ready:

Portfolio surpasses full FI number. The calculator above shows your projected portfolio at your target full retirement age. When that number exceeds (annual spending) ÷ (SWR for your horizon), you've crossed the line. Some semi-retirees discover they crossed it two years earlier than planned because the low draw rate allowed their portfolio to compound faster than expected.

Healthcare continuity is in place. If you've been relying on employer coverage, plan the transition to ACA marketplace coverage (or Medicare if you're reaching 65) before you leave. The ACA Special Enrollment Period following loss of employer coverage gives you 60 days. Don't let healthcare logistics delay a financially justified full retirement.

Social Security optimization window is clear. Most early retirees benefit from delaying SS to 67 or 70. If you're in semi-retirement at 60–65, your working income is making SS delay easier — you're covering current spending without claiming benefits. Once you stop working, the SS delay decision becomes more immediate. Make sure your transition timeline accounts for the SS claiming analysis, particularly the SS-ACA cliff interaction for the first year you're fully retired with no other income. See the retire-at-62 guide for the most complex version of this decision.

When Semi-Retirement Doesn't Work

Semi-retirement is a deferral, not a solution, in a few specific cases:

If your draw rate in semi-retirement still exceeds 4–5% — meaning part-time income barely moves the needle — you may not yet have enough invested for the strategy to be safe. Check your FIRE number first; if you're significantly below it, more accumulation (or meaningfully more hours) is more effective than semi-retiring prematurely.

If healthcare through your part-time employer isn't available and your income puts you above the ACA cliff with no subsidy, semi-retirement can be more expensive than it looks. Run the full numbers including unsubsidized premiums before making the leap.

If you're near the Social Security earnings test limit and need to draw both part-time wages and portfolio income, the combination may accidentally push you above the ACA cliff while also triggering SS benefit withholding — a double penalty that full retirement (with no wages) would have avoided.