Time Plus News

Breaking News, Latest News, World News, Headlines and Videos

How to Retire in Stages (and Why You Should)

Image for article titled How to Retire in Stages (and Why You Should)

Photo: fizkes (Shutterstock)

If you ever fantasized of leaving your job on your 67th birthday and hopping on an international cruise, well, the pandemic likely shattered that vision. With all the ways the pandemic changed how people work, many have latched onto the idea of more flexible, phased retirement plans (or even coming out of retirement altogether).

The idea of partial retirement allows workers to still have a source of income, with the added benefits of softening the psychological blow that comes with filling your days without a job. Here’s what to know about how and why you should consider transitioning out of work with a partial retirement plan.

Why partial retirement might be right for you

For many, the biggest reason to phase out of work in stages is that full retirement is simply not a financial possibility. The simplest form of partial retirement is turning your full-time job into part time hours. Unfortunately, not all companies will allow you to slash your hours, and instead insist on full-time work or none at all. Still, you could transition to part-time work in the same field at a different company, or maybe take the opportunity to try something new—especially if your financial need isn’t pressing (more on that below).

Keep growing your savings

With a partial retirement, the idea is that you’ll still be earning enough of an income to delay tapping into your 401(k) or IRA. In fact, it means you can keep growing your IRA. While there’s no age limit for IRA contributions, you do need earned income. The IRS explains that in 2022, someone age 50 or older can contribute up to $7,000 or 100% of earned income (whichever is less).

Optimize your social security payout

Another reason to phase out your retirement is that you can get bigger social security checks by delaying your payout. If you were born in 1960 or later, your full retirement age for Social Security benefits is 67. If you start payments at that age, you’ll get 100% of what you’re entitled to…but if you can push payments off until age 70, they’ll increase to 124% of that age-67 payment, according to CNBC. With a part-time job, you can buy yourself more time for a bigger payoff.

Lifestyle perks of partial retirement

For many, retirement leads to psychological whiplash, especially if work has been a significant part of your identity throughout your life. There’s a sudden loss in how you fill the majority of your days, as well as your sense of day-to-day purpose. Retiring in stages buys you a grace period to adapt to your new lifestyle—you can enjoy newfound freedom without fully diving into an unprecedented amount of free time. Plus, trying something new can keep you mentally engaged and socially active.

Options for finding paid work in a partial retirement

The key element of partial retirement is holding onto a source of paid work. Here are some examples of jobs to earn income in your partial retirement:

  • Consulting or coaching in your industry
  • Working for a nonprofit you believe in
  • Teaching
  • Landscaping and gardening
  • Selling artwork and crafts
  • Renting rooms via home share apps
  • Part-time retail at a local business

The bottom line

Whether or not it’s out of necessity, partial retirement helps people ease out of the workforce. What’s more, plenty of employers might be drawn to you sticking around part time due to the tight labor market. Gradually easing into retirement comes with social and psychological benefits, not to mention the financial advantages to your savings and social security payments.

The major caveat to note here is that part-time work might not be enough to survive on, let alone enjoy the freedom that retirement should theoretically bring. It’s important to consider the long-term health of your savings, investments, pension plans, and debt to make sure that you’re on track to retire at all. Here’s how you can get started planning to retire, even if you don’t plan to fully retire.