Have you Considered a Phased Retirement? Here’s What You Should Know
It’s quite possible that when you thought about retirement in your 40s and 50s you did so with a sense of anticipation. The free time! You’ll get to do whatever you want! No more reporting to anyone!
However, if you’re in your 60s you might be a little worried about your impending retirement. Free time? Do whatever I want? NOW WHAT?
Enter the phased retirement.
For decades the standard has been for retirees to say goodbye to their jobs and ride off into the sunset. However, some people today are taking a different route to retirement. Rather than clocking out one day and never going back, these seniors are instead phasing into their retirement by moving to a part-time schedule, becoming consultants or even starting small businesses.
At C. Beach Brown, we’re seeing more and more people entering retirement with a phased approach and with so many living longer than ever before…it’s not such a bad idea.
How does it work?
Some employees choose to work on a contract basis rather than as full-time employees. In other cases, employees start cutting back the days they spend at work from five to four and continue to do this until they’re fully retired. And before you say, “My company would never allow that” you might be surprised. Even the Federal Government is offering a phased retirement option.
There are several benefits to implementing a phased retirement.
- When you are working every day, you may not have developed your life outside of the office. This gives you the time to develop those interests and find out what will work for you and what won’t.
- It also keeps a reduced paycheck coming in. Several of my clients are using the extra funds that they hadn’t counted on to travel more than they had planned on traveling in retirement. Because they have fewer office commitments, they are able to get the trips in.
However, if you’re one of those people who wakes up every morning and thinks, “Not this again,” a phased retirement probably isn’t for you. It might be time to jump in with both feet and find other ways to occupy your time.
Also keep in mind that in married couples, each person may have different ideas about this next phase in life. If one person is ready to be completely free and the other isn’t…this can cause some conflict. Our suggestion is if one partner is fully retired and the other isn’t, make sure that the fully retired individual is developing their social network and plans for the next phase of life.
Planning for a phased retirement
If this is something that you are considering, you should absolutely have a conversation with your employer. Once you reach a certain age, they are already wondering what your exit strategy will be. You aren’t leaving them because you hate them, you are looking for a graceful exit on terms that work for everyone. If that exit involves you sticking around a couple of days a week, all the better. A lot of major employers are developing programs to support gradual retirements. Yours may be one of them.
You might also find yourself in the position of your employer asking you to stick around. Here’s what we suggest:
- First, evaluate your financial situation – should you really go right now, or would there be a financial benefit to phased retirement?
- Next, do some soul searching; can you mentally make it if you work longer? Are there things on your bucket list that you would like to upgrade? Do you want to fly first class on the European trip you’ve always dreamed of? If the answer is yes, then it may be worth the gradual retirement.
The conversation around retirement planning is changing. We used to plan for the day when work would become optional. I now have had several conversations with clients where we have planned for the day when they are going to cut back on work and accept a smaller paycheck.
Phased retirement just might become the new norm.