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Embracing A “Phased” Approach To Retirement

September 30, 2021

Man working in office

Man working in office

Going Through A Phase: Embracing A “Phased” Approach To Retirement

September 29, 2021

It can hit you all at once. One day you’re knee-deep in work and deadlines, the next you’re given a pink slip or feted at your going away party, and you’re out the door and into retirement. And while many don’t have the luxury of determining when their professional career may come to an end, those who do are now sometimes embracing the concept of “phased” retirement. Rather than experience the jolt of a sudden transition from one way of life to another, this seems to be a more humane and gentle way of positioning yourself in the best possible way for a post-career lifestyle.

So what exactly is a “phased retirement?” There is no one definition per se but rather it’s a set of strategies that allows a worker approaching retirement age to continue working in some kind of reduced capacity, either through fewer hours per day, fewer days per week, part-time or project-based work, or some other employment arrangement that permits the worker to keep a hand in work-life while gradually transitioning to a retirement lifestyle. According to a recent survey of workers by Transamerica, 45% of US workers envision this sort of arrangement as they transition into retirement. However, according to the Society of Human Resources Management, only 6% of employers currently offer such a program formally, though 15% of employers informally allow for such arrangements. As a concept still under the radar, it could be very useful for employers who need a thoughtful transition of knowledge and skills from older to younger workers and who may be reluctant to completely lose highly skilled workers in a tight labor market. For more on how employers can consider phased retirement as a way to keep skilled older workers, take a look at this recent report from AARP.

What about benefits to the employee? For those who are not yet sure of their retirement goals and plans, or for those not yet ready to tap into a nest egg put aside for retirement, it may give you the autonomy to test out some ideas and the (reduced) income to sustain you while figuring things out. While you may need to do some careful planning regarding utilization of retirement savings or determining how this transitional work might affect your Social Security, to many, the freedom you obtain in return can be a valuable time of reflection and testing to determine how best to spend your retirement days. A recent piece in the Wall Street Journal by writer Bruce Horovitz about his own experience with phased retirement is useful to consider. Calling it “retirement lite,” Horovitz expounds on the pros and cons of this arrangement, stating, “Phased retirement has kicked me in the teeth plenty. Freelance jobs are fleeting…Nor have I gotten fully accustomed to getting paid in September for a gig I completed in May. It has meant cutting back on family vacations and restaurant meals. At the same time, phased retirement has given me my life back. The greatest gift has been more time with my family.” Horovitz goes on to spell out the financial planning he and his wife arranged before plunging into this decision and the mistakes he’s made along with the joy he’s received. To find out more about the pros and cons of phased retirement, put down your briefcase and read here.

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