At this time last year, you were working your normal 40 hour, five day a week schedule. Currently, you're only working three days a week. By next month, you might only be working two days a week. If you're a young worker, then this might sound like a workload reduction your finances can't afford. However, if you're in your mid-60s and are trying to phase your way into retirement, then this might sound like the perfect transition schedule.
Phasing into retirement through a series of stages, versus jumping headlong into it, allows workers to make the employment-to-retirement transition gradually and at the speed they feel comfortable. After all, most people would rather a train gradually slow and allow them to get off, not make them suddenly jump from it going full speed.
Due to the fragile and still very uncertain economy, many U.S. workers nearing retirement aren't contemplating getting out of their jobs just yet. However, as retirement funding feels secure again and nest eggs start to recover from financial market losses, many workers will again start to think about how and when they should make the transition to retirement. At this time, phased retirement is likely to make a strong comeback among employers and employees alike.
Although most employers don't offer phased retirement, several studies have found that managers are often open to a phased retirement. Retaining a veteran worker's expertise and skills through a slower transition out of their job can be very beneficial, especially when skill shortages are already an employment factor.
So, what do you need to do to make a phased retirement possible?
1. Identify Your Goals. Look at your current job and ask yourself what your ideal transition into retirement looks like - fewer hours, alternative job position/title, periodic contract or consulting work?
2. Assess Your Finances. Clearly, any reduction in your working schedule will reduce your paycheck and possibly reduce or eliminate your benefits. Therefore, you need to determine if the paychecks from a phased retirement and/or your current savings will be enough to last you through your retirement years comfortably. If so, the smaller paychecks from a phased retirement can help you get accustomed to living off a smaller amount of money when you actually do retire.
3. Create a Case For Mutual Benefits. Since you can't just decide to reduce your own hours or job title, you'll need to get your employer on board. A phased retirement will need to be about a lot more than just you having a few extra days off; it needs to be mutually beneficial. So, it's important to balance how you want to work with the needs of the business employing you. Does the business have any short-term projects scheduled? Do they need someone to train or mentor new hires?
4. Take It to Your Employer. You're ready to submit your proposal for phased retirement to your employer, but you should gently ease into the discussion. You might start off by asking your employer/supervisor/manager what the goals and strategies are for the future of the business. After several discussions, you might mention phased retirement. Eventually, you can present the case on how your ideas for a phased retirement could be congruent with the goals, strategies, and needs of your superiors and employer.
5. Be Prepared For a Less Than Enthusiastic Response. According to the Initiative on Financial Security at the Aspen Institute, employers have many reasons to be wary when it comes to the idea of phased retirement. For example, employers are uneasy about the uncertainties created by opaque federal regulations concerning phased retirement and employee benefits, taxes, and age discrimination. Managers and supervisors might be equally wary, as they don't want to worry about finding themselves in the position of letting everyone do it because they've let you do it. In the event your superiors aren't so enthusiastic about phased retirement, you can respectfully remind them of the multiple benefits it could offer them, such as allowing them more time to find a suitable replacement for you and allowing you the ability to pass on your expertise and skills to your successor.