Retirement costs millions of dollars, and a lot of people aren't able to save what they need throughout their careers, try as they might. Others aren't sure about whether they want to retire. They worry they'll lack a sense of purpose and meaningful connections with others after leaving the workforce.
Phased retirement could be the answer for both types of workers. Here's a closer look at the different ways you could approach phased retirement and how to decide if it's right for you.
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What is phased retirement?
Phased retirement is when you gradually reduce your hours in the workforce over several months or years rather than quitting work all at once. Some choose to remain in their current position and just cut back their hours over time, but not all jobs permit this.
Fortunately, that's not the only way to approach phased retirement. You could switch employers if your current company isn't flexible enough. Or you could look for something in a completely different field. If you find something that aligns with your interests, it might feel less like work than sticking to a traditional 9-to-5.
You could even opt for something more like a side hustle where you're able to set your own hours. But if you go this route, you need to weigh the costs associated with running the business and how much time you're willing to put in to decide if it's worth it.
Is phased retirement right for you?
Phased retirement's gradual transition from the workforce could be easier than a clean break for those who are worried about losing their sense of purpose. It gives them time to adjust to their newfound freedom and find meaning and connection in other areas of their lives.
For those who cannot afford a traditional retirement, phased retirement can give them some freedom without compromising their financial security. They'll still have a steady source of income to supplement their personal savings and other sources of retirement income, like Social Security.
Delaying full retirement can also make retirement savings goals more achievable. Shorter retirements cost less money than longer ones, so by remaining in the workforce, even just for a few more months, you reduce how much you need to save to retire comfortably.
But phased retirement leaves less time for travel and hobbies than a traditional retirement. So you must weigh this as well when deciding whether it's the right move for you.
If you don't think phased retirement is a good choice but you cannot afford to retire when you'd like, consider pushing your retirement back a year or two. It's not ideal, but it'll give you additional time to save while reducing the cost of your retirement. Then you can make a traditional exit from the workforce like you always planned to.
