Have you noticed how successive governments are increasing retirement age? With the population gradually getting older, the current pension age is becoming unaffordable.
Retirement also doesn’t work for everyone. Many people just don’t like the idea of losing their purpose in life or having to spend all day at home.
That’s where phased retirement comes in.
Rather than working full time one day and having nothing to do the next, you take a gradual approach. Slowly winding down so you have a chance to adapt to the new reality.
It won’t be for everyone but it could be for you.
It’s definitely going to be for me!
What is phased retirement?
Phased retirement gradually reduces your working hours until you’re fully retired.
That can include reducing hours, switching to part time, job sharing or something else.
Employers don’t have to offer it but some are waking up to the potential that keeping experience around to train new starters or help out when needed can be beneficial.
Our attitude towards retirement is changing.
When everyone expected to retire in their 60s and spend time enjoying hobbies, we apparently consider that less and less.
Financial constraints, the meaning work gives us, the social contact and the money, all combine to make retirement less appealing than before.
But we do deserve a rest. To slow down. To give our bodies more time and more relaxation.
Which is why phased retirement is such a great idea.
Benefits of a phased retirement
There are some key benefits of a phased retirement. It won’t be for everyone but there are definite upsides.
Delay your pension
If you’re still working, you can delay or bank your private and state pension. This provides more money later on when you have fully retired or can help mitigate inflation if it carries on being higher than it should be.
Keep your savings
If you’re fortunate enough to have savings, a phased retirement can help keep them. No need to use savings to pay bills or top up your pension as you’ll still be earning.
Depending on how much you get paid or how many hours you work, you may even be able to continue growing your savings.
Try before you buy
Phased retirement also lets you try it out before you go all in. Retirement is inevitable but at least you can adapt to it gradually rather than being thrown in at the deep end.
Then, when full retirement comes along, you’ll have hobbies and a good idea of what it feels like.
Work options for phased retirees
How you approach phased retirement depends on what you do for a living and whether your employers supports it or not.
Many employers will be receptive to it while others won’t.
Professions are often receptive to changes because they know it takes a long time to replace an experienced hand. That experience is also very valuable in many fields.
If your employer isn’t interested in phased retirement, you could work for yourself doing the same thing or try something new.
Examples of career options can include:
- Training or teaching your profession
- Consultancy
- Freelance work
- Part-time work in any area
- Turning a hobby into an income
- Property renovation and rental
- Driving for a rideshare app
You get the idea. Some options can be related to your current career or you could try something completely different.
What to consider if you’re planning phased retirement
Phased retirement isn’t quite as straightforward as picking a date and getting your gold watch.
You’ll need to do a little planning first.
Consider the following:
What work will you do?
Will your current employer be amenable to phased retirement? Does your career lend itself to it? Will you be able to continue doing what you do?
Will you need to learn a new trade or skill? Will you need retraining in other areas of your current career? Will you need certification or accreditation to work for yourself?
Planning what to do when you retire requires a lot of thought but can also be very liberating.
What does a work life balance look like?
How many hours will you want to work? How much money will you need to earn? Do you have children or grandchildren you want to spend more time with? Do you have hobbies and interests you want to spend more time doing?
We all have different expectations when it comes to retirement so it makes sense to think about what it means to you and make it so.
Will you defer your pension?
There is some flexibility in when you claim your state pension and how much you’ll get. Delaying it means more of your allowance is available later. Claiming earlier means less each week or month.
Much will depend on your situation, your outgoings, how much you’ll likely earn and other details, so it’s something to think about.
When will you retire fully?
Finally, when do you plan to fully retire? This can have an impact on savings, investments, pensions and tax.
Having an idea of how long you might phase your retirement for can help you plan everything much more coherently.
Is phased retirement right for you?
Is phased retirement right for you? I know it’s the path I plan to follow when my time comes.
I have the advantage of running my own business so I can work whatever hours I like. That means as many as I can while I’m young enough to handle it and slowly dialling back when I get older.
Not everyone will have a choice about retirement. Some will have to retire while others won’t be able to continue.
If you have the choice, will you choose phased retirement or something completely different?
