3 Reasons a Phased Retirement Is Smarter Than Going All-In
Key Points
With a phased retirement, you work part-time rather than quit cold turkey.
Easing into retirement could work to your financial benefit.
It could also make things more manageable from an emotional standpoint.
A lot of people go from working full-time to suddenly not working at all. That doesn't mean they rush into retirement rather than plan for it. Rather, it means they set a retirement date, give notice, work full-time up until that point, and then stop. Just like that.
If that's your plan, you may want to rethink it. You may find that a phased retirement actually works better for you. Here are three benefits of easing your way into retirement by working part-time rather than going from a full-time work schedule to not working at all.
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1. You can potentially delay your Social Security claim for larger checks
A lot of people have to claim Social Security once they retire so they're able to cover their living costs. But if you're able to manage your expenses on part-time wages and withdrawals from your retirement savings, you may find that delaying Social Security becomes feasible.
Each year you hold off on claiming Social Security past full retirement age (which is 67 if you were born in 1960 or later) boosts your monthly benefits by 8%. That incentive runs out at age 70, but all told, you could end up with much larger benefits for life if you wait. And working part-time could be your ticket to doing so.
2. You gain more financial flexibility
A phased retirement could give you more wiggle room if financial surprises come your way. Let's say you retire only to find that your roof has to be replaced and your car needs work. That could put a huge strain on your savings early on.
But if you're working part-time, you may not need to dip into your savings as much. That could help you stretch your money further, not to mention avoid stress.
Also, you may not realize how expensive it is to keep busy once you have more free hours in your schedule. If you're still working part-time, you can make the decision to continue with that routine to give your retirement savings a last-minute boost. If you come to that realization once you're fully retired, you may have to make some adjustments to your lifestyle goals.
3. The transition can be easier emotionally
Retirement isn't just a financial change. It means you're upending your entire routine.
Many retirees are surprised by how much they miss the structure and social interaction a job provides. Going from a full-time schedule to unlimited free time might feel liberating at first, but you could find yourself getting bored and lonely quickly.
If you work part-time before retiring fully, you'll have an opportunity to build new routines, explore new hobbies, and meet new people to socialize with while having your job as an anchor. That could make it easier to eventually stop working for good.
Retirement doesn't have to be an all-or-nothing decision. You may find that easing in benefits you from a financial standpoint as well as an emotional one.
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