Everyone has a different vision for what they’ll do in retirement. For some, that means additional time with family; for others it’s time spent traveling.
No matter your plans for retirement, I would hazard a guess that everyone has a similar vision for what happens on the day before retirement and the day after. The day before, you go to work. And the day after, you don’t.
Of course, that’s an oversimplification, and nowhere is that more evident than with the expansion of what people are calling “phased retirements.” It doesn’t have to be that one day you finish a 40-hour workweek and the next day you’re retired. Phased retirements help you ease into retirement a bit at a time, like slowly getting into a pool of an uncertain temperature.
Many people would like to slowly transition from work to retirement, according to a recent Transamerica Center for Retirement Studies report, “Striking Similarities and Disturbing Differences: Employers, Workers, and Retirement Security1.” The study found that 56 percent of workers plan to work full- or part-time in retirement.
It’s not just workers that are interested in phased retirements. Many employers, too, shared the understanding that many employees plan to keep working when surveyed by Transamerica — 74 percent expected that their employees want to work after retirement.
And while the majority of employers are aware of their workers’ plans to phase into retirement, only 20 percent of employers are currently offering a formal phased retirement program. In this case, “formal” means a program with specific provisions and requirements for workers who want to transition into retirement.
So, even though many employees would like to phase their retirements, many employers are not on the same page. Another challenge that workers who want to transition face is the lack of policies or programs to facilitate the transition. Transamerica found that only 32 percent of employers provide flexible schedules. About the same number, 31 percent, have a process in place to transition from a full-time to part-time position.
Based on that, it’s clear that many workers will need to take steps on their own to prepare for a phased retirement. While it may not be an option for everyone to continue working for the same company after retirement, they can still find work to help them phase into the next step.
In addition, Transamerica provided a few recommendations that workers can use to successfully transition into a phased retirement.
Create a budget that includes income, accounts for living expenses and paying off any debt you have, and considers financial goals like building both short-term savings and long-term retirement savings.
Begin saving for retirement as early as possible and then save consistently. It’s also beneficial to create an emergency savings fund to avoid taking loans and early withdrawals from retirement accounts.
Participate in employer-sponsored retirement plans, if available. Be sure to take full advantage of employer matches. If you’re not offered a plan, consider contributing to an IRA or another retirement savings account.
You can also prepare yourself for a phased retirement by taking proactive steps to stay employed — like keeping your job skills up to date. Stay current on employment trends and marketplace needs. You might even consider going back to school to learn new skills or to keep certifications active.
Be sure to have a plan in the event of job loss, or in case retirement comes early, due to unforeseen circumstances. Many people find that their retirement timing doesn’t follow their expectations.
Also, your health is important. Be sure to take good care of yourself and monitor your health. In my experience, healthcare can be one of the largest retirement expenses. Healthcare can be such a huge cost for any individual. We should all probably do a better job of monitoring our health, no matter the age. In my opinion it can be extremely beneficial to create good health habits as early as possible. Just like getting an early start on retirement savings and creating a thorough retirement strategy — the earlier you can do it, the more long-term benefits you’re going to have. You can even think of your investing in your health as part of your retirement strategy!
Just like anything retirement-related, the path that you should take depends on your unique situation and the goals you have for yourself.
Talking with a financial services professional can help you identify some steps that you can take to get there.
1 https://www.transamericacenter.org/docs/default-source/retirement-survey-of-employers/tcrs20
18_sr_employer-retirement-research.pdf
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