For some people, the transition from working to retirement is effectively a hard stop -- one day you're plugging away for eight hours at your desk, the next day you're a person of leisure whose days are completely devoid of job-related obligations.
It's a route many workers expect to take, and one that can be satisfying in its own right -- work hard up until you can no longer take it, and then retire and enjoy your freedom. But it doesn't make sense for everyone, especially those people who like their jobs, or like having a social outlet through work, but are reaching an age when holding down a full-time job is getting to be too much. If that's the situation you're in, a phased transition into retirement may be a better solution, and if so, you're in good company.
An estimated 45% of workers today envision that they'll transition slowly into retirement by reducing work hours rather than working full-time up until the day they call it quits, according to a recent Transamerica survey. Here are a few good reasons why it pays to take a similar approach.
1. You'll get a trial run
Some seniors count down the days until they're set to leave their jobs, only to realize that they're quite miserable being retired. The beauty of a phased transition is that you'll slowly but surely get a taste of what it's like to not have a job, and you'll be able to see how much downtime is too much. You'll also have an opportunity to adjust your retirement plans so you're not stuck with nothing to do after years of a full-time work schedule.
2. It may be easier on you mentally
While retirement is an exciting prospect for some people, it's mentally taxing for others. A lot of people lose their identity when they stop working, and lose their sense of purpose when their schedules suddenly become overwhelmingly clear. By opting for a phased transition into retirement, you can slowly but surely adjust your mindset and potentially ward off the mental health issues so many seniors face.
3. It could help you eke out more Social Security income
Your Social Security benefits are based on your earnings during your 35 highest-paid years in the workforce, and you're entitled to your full monthly benefit once you reach full retirement age, or FRA. Depending on your year of birth, FRA is either 66, 67, or somewhere in between. But you don't have to claim benefits at FRA, and if you delay them past that point, they'll increase by 8% a year up until age 70.
Now, say your FRA is 67 and you retire fully at that age. You may need to claim Social Security right away to cover your living expenses. On the other hand, if you simply cut your hours in half at FRA rather than retire fully, you might retain enough income to avoid claiming Social Security immediately, thereby growing your benefits -- for life.
Of course, not every company supports the idea of phased retirement, but if yours does, it pays to consider it. It's a good way to ease into a new stage of life in a much less mentally and financially overwhelming fashion.