Boomer Goals Series: The Ins and Outs of Phased Retirement

Someone holding a retirement stopwatch

(Editor’s note: Welcome to the third installment of the Boomer Goals Series, which will dig deeper into topics facing the “Baby Boomer” Generation. Check out the first installment, about the importance of giving back in retirement, here and check out the second installment, on maintaining good health into retirement, here!)

There are some new trends when it comes to retirement. In the past, those approaching retirement age planned for the day they would no longer work. Retirement years meant spending one’s remaining days navigating a life of leisure that ranged from traveling to simply doing nothing. But that’s no longer the case. Increasingly, many older adults are pursuing phased retirement. Rather than their working days coming to a sudden halt, they are pursuing a more gradual transition toward a retirement lifestyle. And they are finding the opportunities for working part-time in retirement to be quite numerous.

While the options for working part-time in retirement are varied, so are the reasons many are considering a phased retirement. Some choose these pursuits out of necessity while others prefer part-time work to idleness. Others see phased retirement as a new chance to explore new experiences and activities. And some even take the opportunity to expand into an encore career in their later years. Regardless of the motivations, however, a phased retirement requires a bit of planning and preparation. Knowing the ins and outs before you make your move is therefore important if you’re considering these new retirement trends.

What’s Driving Phased Retirement Trends?

When it comes to motivations for phased retirement, there are actually several common ones. From a financial perspective, some individuals simply need to earn additional income post-retirement to makes ends meet. Perhaps, they were unable to acquire adequate retirement savings over the course of the life. Some also experience unexpected costs during these later years that might involve health conditions or elderly parent care. In any case, working part-time in retirement can ease financial stresses that some may experience after leaving their careers. Plus, it can also allow additional opportunities to save for the years to come.

Of course, not everyone has financial pressures driving phase retirement considerations. In fact, many simply find this approach to retirement rather attractive. They personally prefer to be active and socially engaged, and part-time work provides such opportunities. Many also see working part-time in retirement as a way to pursue activities they’ve always wanted to do. Second-chance vocations and encore careers are becoming very popular. In fact, roughly 11 percent of individuals ages 62 to 79 years have some type of secondary employment. Phased retirement simply allows them to use their vast wisdom, experience, and skills in a new and rewarding manner.

Options for Part-Time Work

When considering phased retirement options, there are several potential options for individuals. The easiest option for many actually involves a change in status with their existing employers. Did you know that 20 percent of most firms offer some type of formal or information phased retirement program? In many instances, transitioning to such a program offers significant advantages, like continued employment benefits and job familiarity. This might be important when it comes to securing healthcare coverage. Working part-time in retirement for your current employer may thus be your most attractive opportunity.

There are many other options for working part-time in retirement besides cutting back on your current employer’s hours. Phased retirement also offers a chance to finally explore other interests and hobbies in a more fulfilling way. Those with an entrepreneurial spirit may decide to launch a small business or provide part-time consulting services. Some may get involved with non-profits in an effort to pursue activities they highly value. In fact, working part-time for charitable organizations that know the importance of giving back can be very satisfying.

Important Things to Consider

If you’re thinking about a phased retirement, there are some key things you’ll want to consider. If you’re working part-time in retirement, then you’ll certainly enjoy some financial income. But the amount earned will likely be significantly less than your full-time salary. At the same time, you may lose some valuable benefits that might be difficult or costly to replace. With this in mind, here a few items to contemplate as you move into a phased retirement program.

  • Transitionary Budgets – Depending on your situation, you may need to rethink your budget during phased retirement. For those who wish to live on current earnings alone, working part-time in retirement will likely require some changes. Reducing your costs of living and limiting discretionary spending may be a few considerations in this regard.
  • Healthcare Coverage – Some who pursue working part-time in retirement may no longer have access to their past employer’s health insurance. Therefore, they will need to determine the impact this could have. Especially for individuals who are not yet eligible for Medicare, healthcare coverage costs could be substantial. Exploring this issue before taking a leap of faith is encouraged.
  • Retirement Savings – There are many strategies to consider when thinking about your retirement savings with phased retirement. Some use phased retirement to delay taking out their savings while others use it to continue padding their accounts. Ultimately, the approach you pursue will need to be individualized to meet your long-term needs. But it is important to consider how working part-time in retirement might affect your retirement nest-egg.
  • Quality of Life – Perhaps the most important thing to think about with phased retirement is your overall quality of life. Will working part-time in retirement help you achieve your goals? Is the work you pursue of value and personally fulfilling. Taking some time to self-reflect on these issues is also encouraged when thinking of phased retirement opportunities.

On the Cusp of a Larger Trend

Without question, older adults are trending toward phased retirement lifestyles. This is not surprising given the fact that human longevity is increasing, and the physical demands of many jobs are less. But older adults aren’t the only ones working part-time in retirement. Those who have pursued financial independence, retire early (FIRE) are also embracing such a lifestyle. Not only can this help extend their financial options, but it also alleviates boredom at times. As Baby Boomers reach retirement age, don’t be surprised to see a higher percentage of older adults choosing phased retirement. However, the ones who do it well will likely be the ones that plan for this transition well in advance.

 

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