Retirement planning is filled with questions that are impossible to answer, such as how long you will live, what kinds of returns you will get on investments and what health issues could possibly complicate your plans.
As with any financial decision, it’s a good idea to take some time to decide what level of risk you are comfortable assuming, as well as what you might do to mitigate that risk.
One step that many retirees are taking is a phased retirement approach, in which you gradually reduce your work hours as you head into retirement, rather than transitioning all at once from 40 hours to full retirement. There are several benefits:
- Phased retirement allows you to gradually depend more on your retirement savings, with your initial income still coming almost entirely from your work.
- You may be able to put off claiming your Social Security benefits until 67 or 70, with each delay offering better benefits.
- It gives you time to experience a bit of the lifestyle that comes with retirement and get a feel for which activities will bring you satisfaction during those years.
More and more retirees are embracing a gradual model, with 45% envisioning retirement this way, according to the Transamerica Retirement Survey of Workers. If you think phased retirement planning might be right for you, here are a few thoughts to consider:
Check With Your Employer. If your employer has a policy around phased retirement, there may be certain compliance hurdles that you will need to be aware of as you plan.
If your employer does not offer a specific policy for retirement planning, talk with them about the possibility. They may welcome flexibility as you make plans. Of course, you will need to find out how many hours you need to work to keep health insurance benefits. You may also want to know if a job-share situation is possible, or if there are areas of your distinct expertise that could be used in an entirely new position you hadn’t considered before.
Plan Ahead: Don’t wait until you are ready to plan a more leisurely lifestyle before talking with your employer. Just as you may have required some time to get used to the idea of a phased retirement, they may also need time to determine how some of your responsibilities may shift to your colleagues.
Think Broadly: Embrace retirement planning with the idea that there may be something altogether different in store for you. Maybe you should consider a career change or starting your own business doing something you love on the schedule that works for you. There may be a cause that tugs at your heart, and now you are in a financial position to work for them.
If you’re working through some retirement planning considerations, it may be a good time to meet with us at Lawson Kroeker. We can help you determine which path may meet your needs for an enjoyable and prosperous retirement. Contact us today to get started.