Retiring soon? Consider Phased Retirement

The path to retirement is not as simple as it used to be when I retired. in fact, not only are pensions few and far between today, but people also tend to change jobs much more often. Retiring directly from a full-time job has become rare, with data from the National Bureau of Economic Research shows that just 37% of all workers took this route to retirement. The rest took other paths, most often switching to part-time work before finally giving up a job for good. One way to do this is the idea of Phased Retirement.

The nature of retirement is changing, and many workers do not wish to experience a sudden end to work, followed by the equally sudden onset of full-time retirement. Instead, they wish to ease into retirement, transitioning out of the workforce with a reduced workload.

Phased retirement is seen as a benefit by many older workers, as it allows them to gradually ease into retirement while maintaining a higher income than they would receive if they quit work entirely. This is a flexible retirement option offered by some employers that allows you to take part of your pension while you continue to work.  A phased retirement can include a broad range of employment arrangements that allow an employee who is approaching retirement age to continue working with a reduced workload, and eventually transition from full-time work to full-time retirement. Phased retirement may include a pre-retirement, gradual reduction in hours (or days) of work, then post-retirement, part-time work for pensioners who wish to remain employed. Part-time, seasonal, and temporary work or job-sharing are all work arrangements that can be a form of phased retirement.

Phased retirement is exactly what it sounds like—a retirement plan that eases an employee from the workforce. Phasing into retirement keeps an income stream during the transition. Some feel that retirement phasing is easier to deal with psychologically compared to quitting work entirely.

There are IRS limits on the amount of income an individual can earn before impacting their benefit amount.

From the employers' point of view, phased retirement programs can be used to retain skilled older employees who would otherwise retire (especially in sectors where there is a shortage of entry-level job applicants), to reduce labor costs, or to arrange for the training of replacement employees by older workers.