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Gradual Retirement Provides the Best of Both Worlds

By Jane Young

We get tied up in knots trying to decide when we can and should retire.  We should reframe our thoughts on why we want to retire, how we want to spend our time and how we can financially support our wishes.

If you still enjoy your career and are considering retirement to spend more time enjoying family, travelling, relaxing, and enjoying hobbies, maybe you should consider a gradual transition.   Start working fewer hours and assume less responsibility rather than completely walking away from a rewarding job.

Traditionally we have thought of retirement as completely stopping work on a definitive date – you are either retired or you are not.  It does not have to be this way.  There are countless financial and psychologic benefits to retiring gradually.  Studies have found that over 60% of workers between age 50 and 70 say they would like to work part time.

We frequently hear stories about people who have worked hard and saved all their lives for a secure and enjoyable retirement only to become ill or die shortly after retirement.   This can be a strong incentive to retire but you need to balance this with your financial readiness and the social and emotional benefits that come from working.

Transition into retirement is stressful.  It requires a significant change in mindset from contributing to your portfolio to taking distributions.  Many retirees also worry about outliving their money.

In addition to financial stress, retirees commonly experience a decreased sense of purpose and meaning, their sense of identity is disrupted, and they lose valuable social connections.  Retirement minimizes two essential elements of happiness and emotional wellbeing – meaningful activity and human relationships.

A gradual transition into retirement can help ease this stress.  A gradual retirement enables you to continue earning money and minimize or delay withdrawals from your nest egg.  It also enables you to continue building your Social Security and postpone taking benefits to earn a higher payment as late as age 70.  Rather than stopping work completely, a gradual retirement can provide added financial resources resulting in greater peace of mind and an improved standard of living.

If you are contemplating a gradual transition into retirement, it is advisable to make plans several years in advance.  Professionals and self-employed individuals have the most control over managing their transition into retirement.  However, a plan is needed to scale down a practice or business or transition work to a successor.

Most large organizations do not have formal programs for gradual retirement, but you may be able to negotiate an informal arrangement.  Furthermore, demographics should work in your favor.  As large numbers of baby boomers start retiring there may be more jobs than skilled workers. This labor and skills shortage should make it more likely for companies to consider part time opportunities.   You should plan to initiate the conversation and negotiate the benefits your part time contribution will bring to the organization.