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What is Phased Retirement and Should I Consider It?

Retirement rates have skyrocketed since the COVID-19 pandemic began. Many baby boomers and older-aged employees left their jobs earlier than they originally had planned. 

During what should be a happy milestone in one’s career, many were faced with hard decisions on how to maintain finances without their full salaries. Dipping into savings is an option for some. But not all. Social security payments are also lower for those who initiate benefits before the program’s full retirement age. 

Beyond just the financial implications of retirement, there is also an emotional aspect that factors into how someone feels when they’ve worked 5 days a week for 30 plus years with a company and then suddenly they no longer have that piece of their life. 

Phased retirement is trending more and more today as the workplace landscape also shifts. 

Employer pension plans have dwindled and people are living longer overall today. With a phased approach, one is easing into retirement by keeping an income stream during the transition. Many are now even “retiring twice” as a result of finding work they can do to fill their spare time or to increase income after their initial retirement. 

Some may have a workplace retirement incentive plan offered. These often require benefits-eligible employees who have completed a certain amount of years with the company. They include the ability to work part-time instead of full-time for a fixed period and allow employees to begin to withdraw retirement benefits. 

The other option is to retire and then find a part-time job. 

And 45 percent of U.S. workers agree. A recent Transamerica Retirement Survey of Workers found that almost half of respondents plan to reduce their work hours as they move closer to retirement.  

Whether the reason is for physiologically easing into the shift in lifestyle, or to help financially support yourself after retiring, it’s important to understand phased retirement options so you can make the most informed decision. 

Consider speaking with a trusted advisor about your specific circumstances. You should know for sure if you can afford to retire soon and the impact that retirement will have on your income/lifestyle.