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Part-time in, part-time out
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August 24, 2000: 7:06 a.m. ET
Before you shift into part-time, rework your retirement savings
By Staff Writer Parija Bhatnagar
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NEW YORK (CNNfn) - Full-time. Part-time. Independent. Part-time again. This is what Ellen Roberson's resume looked like recently as she headed to Europe for a two-week vacation. When she returns, it's back to work part-time for a few months, a couple of days a week.
"I enjoy the freedom of not being full-time, of being independent," said the 38-year-old Roberson, a wireless phone-marketing consultant in Atlanta. "I like to travel, spend time with friends and family, enjoy life. There is no trade-off as far as I'm concerned."
Roberson calls such career flexibility a necessity, rather than a luxury, and she's tailored her personal finance strategy to fit her lifestyle, leaving very little room for compromise.
 "One thing that I do - and this is key for me - I do not base my cost-of-living on my earnings potential. I base it on what I feel comfortable with," Roberson said. "But I've not let it get to a point where I can't walk away from any job, at any time, for two or three months — and still be comfortable."
Robertson took the first step alone, assessing her financial situation to decide how much she needed to save and how much to invest. Now, she works closely with an accountant and a certified financial planner (CFP).
Getting more on less
If like Roberson, you're moving from full-time to part-time, or quitting work entirely to go back to school, raise children, ease into retirement, or adopt a new lifestyle, you need a clear picture of where you stand financially.
Click here for CNNfn.com's special report, The Road to Riches.
"My basic advice -- and it doesn't matter whether you're single or a married person -- is that there are no magic bullets here," said CFP Michael Lipsey, with the Creative Financial Organization in Atlanta. "You have to get prepared mentally, and financially, to go ahead and save enough money to get by for the time that you're taking off."
For starters, Lipsey says figure out your after-tax income and how much you spend in a month, and be ready to bring it down a couple of notches. Then get smart with investing.
"The money you save, you don't want to put this in anything risky. You want to leave it in a money market, or government bonds, CDs, so that there's less risk of losing money," Lipsey said.
Do some research and gain some 'benefits'
Be aware that when you leave work, or switch to part-time, working less than 30 hours a week, you start losing benefits. The key ones are health insurance, life insurance, and 401(k) retirement plans.
Experts say it's important to know your company's employee benefits policy.
"Every company is different in regard to its benefits policy for a full-time position, and when you move to part-time. Understand what will apply in your case, and the adjustment you might need to make," said CFP Jim Braziel from Citrus Heights, Calif.
 For example, if you have a spouse with health insurance, and you're going to stop working, you might be able to sign on to their health insurance.
Another way to expand your health insurance coverage is by looking in to your company's supplementary disability policy.
"This is a policy I strongly recommend. If your employer covers 50 percent to 60 percent for it, pay out of your pocket and raise it to 80 percent coverage," said San Diego-based CFP Ken Thompson. "When you leave work, generally you'll be left with that private policy."
If you're quitting, the benefits, such as your company's matches in your retirement plan, will probably stop.
"Since I'm independent, I don't receive company benefits. I have to provide my own. So I set aside savings every month that I don't touch," said Roberson. "But for me, the pay is higher, and I enjoy the freedom of not being in a large corporate structure."
The bottom line on retirement planning
As a part-timer, take a long-term look at what your ultimate goal is.
"Ask the tough questions. If your answer is, I'm 35-years old, and I want to retire at 55, ask yourself how you're doing on that goal, are you on schedule, and what your current savings are," said Lipsey.
If you're switching to part-time, you probably should leave your 401(k) savings where it is, said Elaine Collins, president of Collins Financial Planning Service in Libertyville, Ill. Some plans might allow you to keep contributing, she said.
If you're leaving the job altogether, you won't be able to contribute but you can keep the money in the plan, Collins said. Otherwise, you can roll it into an IRA. The factors will be how much money you have in the plan, and how good your investing options are.
"If you plan to go back full time, it keeps your options open," Collins said.
With a traditional IRA, you can contribute up to $2,000 a year and deduct the amount from your taxes. Or if your adjusted gross income is less than $150,000 for a married couple filing jointly or $95,000 for a single person, you can contribute $2,000 a year to a Roth IRA. You can't deduct the contributions, but you can withdraw money tax-free at retirement.
 A spousal IRA allows a working, married person to contribute up to $2,000 a year for a non-working spouse, according to Dee Lee, author of "The Complete Idiot's Guide to 401(k) Plans."
After that, life insurance policies and taxable investing accounts of stocks and mutual funds would be other sources of income, Thompson said.
Another savings tip is to keep trying to save the same amount of money every year that you would have saved if you had kept your job. The law allows you to contribute $10,500 or typically 15 percent of your income a year to a 401(k).
Budget and preserve income
If you know what your income is, build up the savings by matching expenses to income. If you're single, spend less. If you're married, aim to save the spouse's entire paycheck. Either way, scale down on discretionary expenses.
"One of the biggest ways that people waste money is on eating out and entertainment. It's a luxury, and it's expensive," said Lipsey.
Also, eliminate your consumer debt. According to experts, insecure debt has higher interest rates. So if you have a car loan, pare it down.
"But if you really want to know how to live on one income, you might have to move back with your parents," said Thompson.
Collins advises people to create an emergency reserve -- either a bank account, life insurance cash value policy -- or make an arrangement with someone in the family, giving them access to it if the situation arises. "Make sure you know where the money is and build it up over time," said Collins.
Don't forget to invest in yourself
When you take time off to go back to school, you're doing this already. For part-timers, experts suggest keeping updated on the industry you left and its latest trends. That way, when you're ready to steer back onto the fast track, you can pick up where you left off.
"My wife was working for a biotech company in San Diego when she walked away to become a mom," said Thompson. "We have two children now and she plans to go back part-time someday. Any investing I do for her right now would be in education, to keep herself updated, ahead of the curve, especially since technology is moving so fast right now." 
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