I am hoping for a phased retirement in which the transition from full-time employment to not working at all is gradual. My goal is to have a planned decrease in paid work and corresponding increase in unpaid activities. I suspect that there are many others who have the same idea. The reasons are simple: It can be difficult to financially and emotionally adjust to going from full-time employment to no employment in a single leap.
There are aspects of working that many of us enjoy, beyond receiving the income. We should not be in a hurry to leave behind those psychological and emotional benefits. Conversely, we want more time and energy to pursue other interests. Thus, gradually moving away from one set of working benefits and into a set of non-working benefits seems ideal. Here are four potential advantages of leaving full-time work in phases rather than all at once:
1. Emotional preparation. Many new retirees are troubled by the loss of connections with their work and co-workers. This can effect their sense of self-worth as they search for other interests, activities, and people to interact with. A phased retirement provides more time to adjust to these feelings and to search for your proper place in a retired world.
2. Financial benefits. A phased retirement means a continuation of income and even workplace benefits, such as health care. Even if you have a pension or plan to take Social Security at age 62, Medicare eligibility doesn't begin until age 65. The continued part-time income from a phased retirement can allow you to delay claiming Social Security retirement benefits. This will improve the long-term financial picture for you and for a surviving spouse.
3. Mental health benefits. A skewed work-life balance can be a major source of stress in our lives. Endlessly working for the weekend is no fun at all. Phasing into a retired life can relieve some of that stress. Some psychological research indicates that retirees who work part-time are healthier than those who transition abruptly into a complete retirement. The same study showed that a phased retirement was also beneficial to mental health, if the part-time work was related to the retiree's previous career.
4. Keep your options open. Another advantage of a phased retirement is that you can begin a phase-out period while keeping your options open. While working part-time you can assess economic conditions and their impact on your finances before deciding when to stop working entirely. Maintaining options in a volatile economy is less stressful than being forced to un-retire if things don't go well financially.
A phased retirement is a time to test the waters and ease into a new life. During a phase-out period, you may decide to extend your working life or do just the opposite. In either case, the decision will be yours, based on your own experiences.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.