How to Retire in Stages (and Why You Should)
If you’ve ever dreamed of leaving work on your 67th birthday and taking an international cruise, well, the pandemic has likely shattered that vision. Because the pandemic has changed the way people work, many have seized on the idea of more flexible, phased retirement plans (or even retirement waivers ).
The idea of partial retirement allows workers to still have a source of income, with the added benefit of mitigating the psychological blow that comes when you fill your days off work. Here’s what you need to know about how and why you should consider leaving your job with a partial retirement plan.
Why Partial Retirement May Be Right for You
For many, the main reason for phasing out is that full retirement is simply not financially feasible. The simplest form of partial retirement is to move your main job to a part-time job. Unfortunately, not all companies will allow you to shorten your working hours and instead insist on full employment or no work at all. However, you can move to a part-time job in the same field at a different company, or maybe take the opportunity to try something new, especially if your financial needs aren’t immediate (more on that below).
Keep increasing your savings
With partial retirement, the idea is that you will still earn enough income to defer using a 401(k) or IRA. What this really means is that you can keep increasing your IRA. While there is no age limit for IRA contributions, you do need earned income. The IRS explains that in 2022, a person aged 50 or older can contribute up to $7,000 or 100% of earned income (whichever is less).
Optimize Social Security Payments
Another reason to phase out retirement is that you can get bigger Social Security checks by deferring your payment . If you were born in 1960 or later, your full retirement age for Social Security benefits is 67. If you start paying at that age, you’ll get 100% of what you’re entitled to… According to CNBC , by age 70 it will increase to 124% of that payout at age 67. By working part-time, you can buy yourself more time and get more bang for your buck.
Benefits of Partial Retirement
For many, retirement comes with a psychological blow, especially if work has been an important part of your identity throughout your life. You suddenly lose how you fill most of your days, as well as your sense of daily goals. A phased retirement gives you a grace period to adjust to your new lifestyle – you can enjoy your newfound freedom without being engulfed in an unprecedented amount of free time. Also, by trying new things, you can keep your mind active and socially active.
Options for Finding Paid Jobs with Partial Retirement
A key element of partial retirement is maintaining a source of paid work. Here are some examples of jobs that allow you to earn income after partial retirement:
- Consulting or coaching in your industry
- Work for a non-profit organization you believe in
- teaching
- Landscaping and gardening
- Sell paintings and crafts
- Room rental through Home Share apps
- Partial retail in a local business
bottom line
Regardless of the need, partial retirement helps people get out of work. What’s more, many employers may be attracted to having you work part-time due to the tough job market. Gradually facilitating retirement brings social and psychological benefits, not to mention financial benefits to your savings and Social Security payments.
The main caveat to note here is that part-time work may not be enough to survive, let alone enjoy the freedom that retirement should theoretically bring. It’s important to consider the long-term health of your savings, investments, retirement plans, and debts to make sure you’re on your way to retirement at all. Here’s how you can get started with retirement planning, even if you don’t plan on retiring completely .