After spending a significant portion of your life at a 9 to 5 job, the sudden transition into retirement can leave you feeling stressed. While you have more time for activities you enjoy and greater control over how you spend your days, there are some downsides. You may struggle to structure your days in a meaningful way or experience more financial worry now that you don’t have a steady paycheck.
Planning for retirement by setting a budget and creating a schedule that balances leisure time with fulfilling activities is important, but there is another option that lets you test-drive retirement. A great way to avoid the stress of sudden change is with a gradual shift away from full-time employment with phased retirement. For this approach, you adopt an alternative work schedule that keeps you actively employed and earning but gives you more free time to discover other interests. Learn more about why this practice is growing in popularity to determine if it’s the right strategy for you.
How Does Phased Retirement Work?
Phased retirement offers a more flexible exit strategy from employment. If you are approaching retirement age, you may choose to slowly reduce your work hours by switching to a part-time schedule. It’s important to speak with your employer to determine what options are available through your current position, as phased retirement is not a universal offering.
If your employer doesn’t support a phased retirement transition, you can search for other opportunities for seasonal work, freelancing, and consulting. Or, you can start your own business. Whether you want to use your experience and the knowledge you’ve accumulated in your field to work reduced hours, or you wish to go in a whole new direction and start a passion project, working for yourself helps you ease into retirement by giving you greater control over your time while still earning an income. It’s also the ideal way to become a mentor to someone else and pass along your expertise.
Benefits of Phased Retirement
Opting for phased retirement is a smart idea if you aren’t quite ready to stop working entirely. Some of the benefits of this approach include:
- Build additional financial security.
- Take advantage of employer health insurance and retirement contribution plans.
- Postpone Social Security enrollment to maximize your benefit.
- Ease into retirement for a less stressful transition.
- Test out ways to spend your increased free time.
- More employers are starting to offer a phased retirement program option.
Like all retirement plans, you must understand your options and formulate a plan before you begin. Take the time to examine your budget and consider the impact that reduced hours or alternative employment will have on your healthcare and paycheck. Find out if part-time employment entitles you to start receiving any kind of retirement benefits. It’s always a good idea to invest in advanced retirement planning to get your financial details and other affairs in order to prepare for this milestone in your life.
Potential Drawbacks of Gradual Retirement
The changing landscape of employment combined with financial challenges has impacted retirement for many people. You may have anticipated working until about age 65 and then retiring to enjoy your golden years. However, the reality of the situation has a few challenges:
- Fewer jobs are offering pensions you can count on to support you financially after your salary ends.
- Social Security benefits often aren’t enough to live off of alone.
- Even if you have saved money for retirement, lengthening lifespans could mean your savings won’t stretch as far enough.
- You may also worry about affording healthcare during retirement since Medicare doesn’t cover all expenses.
- If the pandemic and economic struggles negatively impacted your earnings and savings, you may need to work longer to recoup your losses.
Many people continue to work past retirement age out of necessity. Or, you may simply not be ready to make the transition from full-time employment to retirement. Phased retirement can provide a solution for both of these problems, allowing you to continue to earn money while slowly adjusting to the idea of moving on from your job position.
Is Phased Retirement Right for Me?
A gradual approach to retirement is an excellent option for some. Determine if phased retirement or full retirement is right for you by examining your personal preferences and the details of your situation. Phased retirement is a more complicated approach than full retirement at the end date of your employment and, therefore, requires more planning. It’s a good idea to speak with a financial planner to ensure you take into account all of your financial details and set yourself up for a comfortable retirement once you exit the workforce entirely.
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