Retiring / Accept part time consulting with current employer?

[steveinjersey]

I am retiring at age 60 in a couple of months after 37 years at a large company! Some days I am excited and on others I am wishing that my retirement date would hurry up and get here! No regrets with my decision to retire.

My boss didn't want to lose me and has offered twice my current rate to work part time as a consultant. I believe that as a consultant I would be required to file taxes quarterly and pay double social security and Medicare taxes. Detailed expense records also would need to be maintained. I don't want to complicate my life at this point. The tax/expense record side of his looks like a headache even if the money makes sense for the work performed. I don't need the money. I don't need tax stress.

This consulting work would be a favor to a good boss and friend. I almost wish that I hated my boss.

I would be interested in reading experiences of anyone else who wanted to move on to a simple life in retirement when a good boss is asking for a favor to hang on as a consultant.

Thanks!

Steve

 

[davebarnes]

If you like the work, you should do it.
The record keeping is not that difficult.
The money can be spent on extras.

 

[Jerry1]

Not exactly the same, but I did go part time (3 days per week) for the last two years. he thing I found very interesting is that the less I worked, the hard it was to go in to work on the other three days. I thought it would make it easier to work even longer (which my boss would let me), but it has sped up my desire to pull the final plug and be done with it.

 

[Katsmeow]

OK, yes, my situation is somewhat similar. Except I became a part-time employee which alleviates at least the tax concerns you raise.

When I was in my mid-50s I went in to retire as DH was retiring from his job. I have a particular colleague that I had been working with for 30 years. And, yes, he asked me to continue working one day a week doing only the kinds of tasks I wanted to do.

I didn't really feel that I needed to do it. But, I wanted to help him since we had worked together so long. My main criteria was that I could turn down a task if I didn't want to do it. I did stay on as a part-time employee. However, I am paid by the hour so I do have to turn in time sheets which is fine.

A few years into the arrangement I was tired of commuting in to the office so went in to resign again (I had moved to where it took my over an hour to drive in). This time I was offered the ability to work only from home. That seemed like a good idea so I agreed to try it out.

So - it is 7 years since I first went to the part-time status and I am still doing it on a very very part-time basis. The amount of hours has dwindled to only a few hours a month usually. At the height, I worked a couple of days a week but that was really more than I really wanted to work.

Anyway -- it has been a good deal for me. I've mostly used the money for fun stuff. I didn't like it that much when I was commuting in to the office two days a week. That was too much work and the commuting was not fun.

The work that I've done the past few years working from home has all been fine. Because I am working from home it really doesn't interfere that much with the rest of my time. I do at this point often go weeks without doing anything which suits me fine. I think if I was still working one day a week even I would have given it up long ago. I am basically only doing it as a favor.

That said -- it has worked out fine. But, I've always felt free to stop whenever I wanted to. And the key things for me have been working from home and being able to turn down anything that doesn't fit my schedule or what I want to do.

 

[Ronstar]

I had a similar situation. I had a couple of lingering eminent domain projects hanging around when I retired. I agreed to be a consultant to my former firm until these projects were finished.

I wish I had not done it. Although I have only worked about 200 hours in my 3.5 years since retirement, it seemed like the work interfered with my retirement. And the 2 projects are still ongoing. I was paid by the company an hourly rate and they deducted FICA, Fed, and State taxes. And I put most of the $ in my 401k. I since rolled my 401k into an Ira and had to sever this relationship. From this point forward I'll be paid directly from the client and be responsible for taxes similar as to what OP mentioned. Unfortunately theses projects could linger a while longer in the courts and I'll have to work a little more.

Like OP, I did it as a favor - mainly to my replacement who didn't want to get up to speed on a tricky project that eventually ended up in court.

 

[Huston55]

OK, yes, my situation is somewhat similar. Except I became a part-time employee which alleviates at least the tax concerns you raise.

+1

Worked for mega for 30+ yrs & they asked me to do some consulting (~200hrs/yr). I wanted to do it, and retained ‘part time employee’ status. Easy Peasy; paycheck & no hassles.

Do it as long as you enjoy it, then stop.

 

[Philliefan33]

Don’t make the decision based solely on the record keeping task. It’s not hard to figure out your self-employment taxes, tax prep software does that for you. If you are driving to the same workplace every day you cannot deduct that mileage, so no need to track. Still going to the same workplace probably means very little deductible expenses.

Being a self-employed contractor receiving a 1099Misc opens up some options for putting away some extra retirement money. For instance, the contribution limits for a SEP IRA can be much higher than the $6500 limit for traditional IRAs.

 

[Red Badger]

If you like the work, you should do it.
The record keeping is not that difficult.
The money can be spent on extras.

+1.

Do it if you WANT to.

I thought I might do some consulting once I retired. However, my "fire in the belly" has been for projects at home, travel, volunteering. SCM projects? Nope!

 

[kcowan]

I did it for 6 months average 1.5 days/week at twice my hourly rate while I was also pursuing other part-time consulting contracts. I was able to perform the work from an office assigned in the part time contract. This was win-win because I was available to the new employer even while performing the old work. After 6 months, we agreed that my contribution was complete.

 

[Bamaman]

Do yourself a favor and take 6 months off to decompress. Then regroup.

 

[donheff]

I did a little consulting after ER. It gave me a bit of perspective. I soon learned that I didn't want the work and didn't need it. But don't be driven by the hassle of quarterlies. Not a big deal.

 

[joeea]

My boss didn't want to lose me and has offered twice my current rate to work part time as a consultant. I believe that as a consultant I would be required to file taxes quarterly and pay double social security and Medicare taxes. Detailed expense records also would need to be maintained. I don't want to complicate my life at this point. The tax/expense record side of his looks like a headache even if the money makes sense for the work performed. I don't need the money. I don't need tax stress.

This consulting work would be a favor to a good boss and friend. I almost wish that I hated my boss.

I would be interested in reading experiences of anyone else who wanted to move on to a simple life in retirement when a good boss is asking for a favor to hang on as a consultant.

I also retired at 60 as a mid-level manger in the software side of a large financial services company. At the time I told my friends at the workplace to let me know if I could ever help them in any way.

A few months later, I got a call asking if I could come in as a consultant to help them through some tough projects. I agree to do so for 2 days per week. Like you, I didn't need the money but I did want to help my friends.

For them, it really helped. For me, it worked out well just working 16 hours as a consultant, rather than as a middle manager - no endless administrivia, no travel and dealing with headquarters, no pressure, no late nights and weekends. I was able to basically just do the "fun part" of the job and avoid all the rest! It only took up 2 days of my week, leaving the rest of the week for other things.

The way I worked it out was to be employed by a staffing agency and work as a W2 employee for them. They in term contracted my services back to my former employer. My employer didn't like to deal with self-employed contractors anyway, so it worked out for them as well. Like you, I wanted to avoid the hassle of tracking and handling the tax issues. Doing it this way made things very easy for me, even if it meant I couldn't defer income taxes as much as I would have being self-employed.

That said, if you don't want to consult, don't! Your former company will eventually have to learn to live without you anyway.

 

[RunningBum]

Mine was an easy "No". They offered me the same rate as I was getting, but without any benefits, so I'd have been getting less. It was also going to be on an "as needed" basis, so they'd call me in for the fires, and keep me unpaid on the sidelines in between. Plus the work was getting sent overseas so I wouldn't even be working with my old boss, who I also liked.


Remember, that friendship goes both ways. If you really don't want to do it, your boss/friend should make sure the job is transitioned to someone else in the two months you have left. Tell him now if that's what you want. Relying on you to keep working is taking advantage of a friendship.

 

[CRLLS]

If you decide to be self-employed, I find the biggest record keeping issue is tracking the hours worked. And then there is the unpaid time while you work the (monthly?) billing process.

We started out with a flat fee for up to 30 hours worked, plus a per-hour rate above that, plus any travel expenses. Some months I never worked over 12 hrs. Some months I had had maybe 40-45 hrs and got paid accordingly.

After a couple of years doing this with a single client, tracking every 5-15 minute time block became a pain. We changed our agreement to a flat monthly rate regardless of hours worked, plus expenses. I no longer have to track every time I read my work e-Mails when/if they come in. I still have to spend an hour or so every month putting expenses together for billing. I can do that.

Fortunately, all that ends Dec 31st! I gave him 12 months notice last January and the end is near. I don't have any regrets doing this for the last 4-5 years. It is just time for me to have "my time" 24/7.

And then there was the filing of quarterly taxes and planning that income against ACA subsidies etc.

Good luck to you whatever you decide.

 

[jollystomper]

The decision should be more based on if you would actually enjoy the work. If my employer offered me something part time that I could work at my own pace, and it was work that I liked, I would consider it. The paperwork issues you raised would be minor.

One option that a couple of my ER friends have done - rather than become a consultant, they joined up with a temporary agency, and Megacorp hired them through the agency. They did not have to deal with the paperwork, as they were employees of the agency. They made less, but to them it was worth it.

 

[Bir48die]

Not exactly the same, but I did go part time (3 days per week) for the last two years. he thing I found very interesting is that the less I worked, the hard it was to go in to work on the other three days. I thought it would make it easier to work even longer (which my boss would let me), but it has sped up my desire to pull the final plug and be done with it.

Made it 6 months PT. Offer was more than generous but I had locked in days I had to show up. Had lost my zeal for business. Certainly miss the benefits but I don't regret the decision.

 

[Sunset]

OP - I did do it, and I highly recommend it. Just be sure you contract Directly with the company, not through a head hunter/ personnel agency /employment agency (which will take 25% or more off the top and disqualify the great SE 401K opportunity).

Tracking expenses is easy, just use a spreadsheet and list what you buy, and keep the receipts or a photo of them. Driving to the office if done regularly is not an expense.

You get to also deduct an easy $500 for home office if you need to have a home office, you can deduct more if you want to track all home expenses.

The super big benefit is you can open a self-401K for example at Vanguard and stash up to $60,000 per year in retirement accounts !!
I suggest you open both a self-401K IRA and a self-401K ROTH, for maximum flexibility.
There is paperwork they send you, and with mailing you will miss it for this year, but that does not really matter as you haven't started the self employment yet.
https://investor.vanguard.com/what-we-offer/small-business/individual-401k

You can sign up for professional liability ins. with Hiscox , it was the best I found, and noticed some agents wanted to use it and tack on their fee, but you can easily do it directly.
https://www.hiscox.com/small-business-insurance

 

[Teacher Terry]

I did it and really enjoyed it. After 6 months it ended. I worked from home and only went into the office 1 day/week to see clients. I now work pt.t. from home teaching an online course 3x's/year and I love that after 5 years. It doen's top me from going anywhere as I can vacation as long as i have internet access.

 

[Milton]

Mine was an easy "No". They offered me the same rate as I was getting, but without any benefits, so I'd have been getting less. It was also going to be on an "as needed" basis, so they'd call me in for the fires, and keep me unpaid on the sidelines in between.

Tempting!

 

[jabbahop]

I had a similar opportunity when I retired. After 6 months, I decided to try it out on a temporary consulting project.

Pros:
- hourly rate was excellent
- got external validation that I could still do valuable work
- SOME of it was interesting

Cons:
- I HATED losing my schedule freedom. Even if it was only a single hour long phone call, it drove me crazy to lose the freedom.
- made it tricky to qualify for ACA subsidies
- the additional $ didn’t make a bit of difference on our happiness

In the end, I finished the project (which went on 2x longer than I had been promised) and declined to extend for the next one.

Obviously a very personal decision.

 

[pb4uski]

....My boss didn't want to lose me and has offered twice my current rate to work part time as a consultant. I believe that as a consultant I would be required to file taxes quarterly and pay double social security and Medicare taxes. Detailed expense records also would need to be maintained. I don't want to complicate my life at this point. The tax/expense record side of his looks like a headache even if the money makes sense for the work performed. I don't need the money. I don't need tax stress. ....

I ended up not consulting with my for employer after I retired but you are making a mountain out of a molehill.

As an early retiree, you may well need to do quarterly estimated payments whether you consult or not depending on your tax situation and even if you do need to do estimated payments it is a pretty simple thing. Self-employment taxes is a simple form off your tax return but is basically your self employment profit times 15.3% but you get to deduct 1/2 of it.... if you use software to prepare your return it sort of happens automatically but you do need to consider it in your estimated payments.

If the tax reporting is your biggest concern, see if he's willing to just keep you on payroll as a part-time or hourly employee... that way they handle the tax stuff and you just get a W-2 like you do now.

At my former employer, if you worked 50% or more (20 hrs/week or more) then you were eligible for benefits just like a FTE, only pro-rated other than health insurance, which was the same as a FTE.

 

[brucethebroker]

I believe that as a consultant I would be required to file taxes quarterly and pay double social security and Medicare taxes. Detailed expense records also would need to be maintained. I don't want to complicate my life at this point. The tax/expense record side of his looks like a headache even if the money makes sense for the work performed. I don't need the money. I don't need tax stress.

This consulting work would be a favor to a good boss and friend. I almost wish that I hated my boss.

Steve

Steve, re-read this paragraph of your post. It sure sounds like you are asking us to talk you into it, and that is a serious red flag.

This will most likely be a "no good deed ever goes unpunished" type deal if you try to help your boss. My guess is that sooner or later, they will forget that you are "doing them a favor" and the pressure/stress will follow.

I am self employed PT now in retirement. Have been self employed 40 years. Trust me, if I can handle the paperwork, it will most likely be a piece of cake for anyone even slightly organized. The tax deductions far outweigh the hassle in my opinion (see other comments posted about the benefits). I agree with the take 6 months to decompress first comment.

 

[CRLLS]

DW retired from an accounting job some years back. They later asked her to come back as self-employed to close the books for the year. We did some calculating and went back saying OK. I think her price was around 2X her last hourly rate. They had no benefits to pay her, no SS, no unemployment insurance, no 401K match expenses, no health insurance, etc, As self-employed We had most of that, plus the employer's share of SS to cover. And we explained that to them. (Plus we added a small bit for their convenience of "needing" her. We didn't "need" them.)

They expected to bring her in self-employed at her last hourly rate. Needless to say they couldn't meet her terms and she didn't get the gig. The boss told my wife's old co-worker. "She doesn't understand. She won't get any good job references from me!" The co-worker simply replied,"She doesn't need any references. She is retired!" I guess some people just don't understand the word "retired".

 

[CoolRich59]

This will most likely be a "no good deed ever goes unpunished" type deal if you try to help your boss. My guess is that sooner or later, they will forget that you are "doing them a favor" and the pressure/stress will follow.

Big thumbs up to this point.

I had this experience before I even agreed to help.

An old acquaintance was setting up a consulting firm and wanted me to be his atty. He called and left me a message on a Saturday morning asking if we could have a call on Sunday to discuss this wonderful *opportunity*. He stressed that the money would be good, I could work as much or as little as I wanted, on a schedule of my own choosing, blah, blah, blah.

I called back and got his voice mail. In my message I said I never worked on Sundays, but said I could be available as early as 7am Monday. On Sunday, he called 5 times, left messages, texted me several times, and then called my wife to complain that I wasn't being responsive.

When I saw my phone all blown up with his calls and messages, it was obvious that, despite his assurances of flexibility, he would expect me to be at his beck and call at all hours. I had no hesitation turning down this great opportunity.

 

[wmc1000]

My former employer wanted me to be available on an as needed basis and thought offering me an hourly rate 5% higher than my previous salary was "generous". I countered with a rate that was equivalent to my previous rate plus benefits, additional tax costs and prior years bonus. They were aghast because it was more than 50% higher than my previous "base". I told them I didn't need the work, why would I work as a self-employed consultant for less money than I had previously especially when business was showing growing sales and profitability. Don't expect I will hear from them unless they run into a dire emergency and if that happens I will most likely decline any offer.