Could a Phased Retirement be Right for You? | Blog

Will you let your working life determine when, and how, you retire? Or do you want to retire on your terms?

As we help clients put together their ideal retirement pictures, there are different strategies for entering retirement that we can use to help you to retire on your terms, including phased retirements.

We recently came across an article in The Investments Wealth & Monitor from Anna Rappaport called Reboot, Rewire, or Retire? This piece explores how you can transition into retirement by reducing your work hours or creating a new flexible work schedule, rather than stopping work full-stop. This is what is called a phased retirement.

To explore phased retirements and what it looks like for those who use this strategy, we spoke with our client relationship manager Brad Hansen. Brad knows first-hand what this kind of retirement is like, as he is in the middle of his own phased retirement. Because of this, he was able to give us a behind-the-scenes look of what it’s really like to have a phased retirement — and why planning for any kind of retirement is about so much more than investment management

Meet Brad Hansen

Like an increasing number of Americans, Brad decided to not retire based on the corporate world’s schedule. Instead, he decided to retire on his own schedule. 

When Brad reached age 61, he was offered a nice severance package from his company. However, this didn’t fit in with the soft retirement landing that he and his wife had envisioned. So instead of fully retiring, Brad continued to pursue his interests and instead went on to work as an adjunct professor at local Carroll University. There, he found fulfillment in reconnecting with the younger generations and in seeing the optimism and enthusiasm they have about the future. 

Thanks to this opportunity, Brad then began to look for something else to pursue that would also allow him to be helpful and to connect with others as he transitions into his retirement.

That’s what led him to Keil Financial Partners. Instead of retiring full-stop, here, he’s able to exercise flexible work hours and now works 10 to 15 hours a week helping others achieve their ideal retirement, too.

In addition to pursuing his passions while working on his terms, Brad has also found that a phased retirement can help pre-retirees to experience living within their means under a “practice plan” until they’re ready for their full retirement. During this time, Brad has been able to get used to living on a lower income while taking money from his retirement funds, and now has a better idea and plan for how his retirement will look when his social security money comes in to replace his current income. 

According to Brad, a phased retirement can also help you focus on the early years of retirement without the levels of stress and healthcare questions that traditional retirees tend to have. Plus, it can also help you to avoid some of the big early expenditures that can come with a traditional retirement. 

Now that he’s experienced a phased retirement first-hand, Brad is sharing his tips on how you can pursue this type of retirement — and what to keep in mind when planning for it.

The Four Areas of Planning

If a phased retirement seems like it might be best for you, Anna Rappaport recommends four key areas to focus on when you’re making the transition away from work:

1. Your pursuits
2. People
3. Places
4. Your health

In addition to these, we also recommend keeping in mind how your money is going to help make each of these four areas better for you and your ideal retirement.

Your Pursuits

One of the most important things Brad has learned about a phased retirement is to be selective and to pick an activity or job to move on to for the right reasons. Don’t just grab onto anything that will fill up your time. Instead, pick something to do that will give you a true sense of purpose and motivation.

This will also help with one of the major changes that can come with retirement: your sense of identity. 

• Who are you now that you’re not fully working?
  • Are you retired from your prior, main job? Or pursuing a passion?
• When someone asks you what you do, what do you say?
  • Are you a former something, or are you a current someone?

By having a purpose and motivation, you can fill your time with activities that bring fulfillment to your life so that you’re still able to identify who you are and what you love to do.

Brad’s answer to this question is that he works with a retirement planning company to help people retire successfully — and that’s what’s driving him forward. This new chapter in Brad’s life is a good one because he’s had the opportunity to help people save money and to put them in a good place for retirement. 

Brad also believes that there are going to be more chapters after this one, and those chapters will be closer to your traditional view of retirement as he gets closer to fully exiting the workforce. 

People

Another key area to consider when preparing for your transition in retirement is: who will be a part of your life as you transition out of the workforce? 

A lot of times, your whole social system can revolve around work. Then, if you retire the traditional way where you simply stop working, your social circle might go down to zero in just one day. 

That’s why a phased retirement could be a nice way to continue to interact and make new connections with others. 

Another great way to stay connected without having to meet face-to-face is by using the power of technology. With mediums like texting or social media, you can stay close to the people who are important to you no matter where you are.

Brad encourages you not to shy away from technology and to use it to keep in touch with your kids and grandkids. In fact, he says if you ask them how to use it, or what the latest app is about, they’ll love you for it! Challenging yourself to learn and stay on top of these technological trends can keep you engaged, and can also keep you cognitively and mentally active.

Places

One of the most common questions that people ask when thinking about retirement is: Where should I live out my retirement?

The places you’re planning to live in during your retirement are an important part of the retirement puzzle, and even tie in closely with the “people” and “pursuits” part of the planning process.

According to Brad, the place you live is an important part to consider because it guides what your social networks are going to be, what activities will fill your time, and even what your travel will be. 

For example, do you have elderly parents and want to be close enough to provide assistance? If you have grandkids, do you want to be close enough that you’re babysitting all the time, or do you want to live farther away and see them every once in a while? Will you be able to stay with your existing social groups, like your church, if you move?

That’s why your choice of where you will live is important and has to be considered not only financially, but also from a practical or lifestyle point of view to make sure you’re cultivating the ideal retirement picture you desire.

From the financial side, we often hear people say that they will downsize their home in retirement to free up some cash. However, we’ve found that when downsizing, what you end up doing is buying a smaller, nicer place instead that costs just as much as your older, bigger place. And if there’s any money left over, you’ll likely go and buy new furniture and appliances. That’s why we haven’t found downsizing to be as cost-saving as it could be.

If you’re planning on moving to an income tax-free state like Florida, here in Wisconsin, social security is state income tax-free. So, if you’re living on $70,000 or $80,000, for example, half or more of that money might be your social security. If so, a move to a state like Florida won’t necessarily be any more advantageous than the benefits you’re getting right here at home. 

Your Health

Healthcare is also an important piece of the retirement puzzle. Many people know that health is important, which is why we often run into people who are still working just for health insurance — even if they’re in jobs that they’re unhappy with.

But there are always options like COBRA and the Affordable Care Act to help you out, and there are always ways to bring together this piece of the puzzle so that it fits in with the rest of your retirement picture. (In case you missed it, check out our blog post on health insurance here!)

A lot of times, we can also have a preconceived notion about what will happen when we retire. But it can be worthwhile to take a step back, take in different perspectives, and to evaluate your options. By doing so, you could find a solution to your problems and concerns that you had not initially thought of, that can better lead you towards your ideal retirement.

Phased retirements and flexible work styles are becoming increasingly popular in America. So, don’t be afraid and ask your employer about your options and to present them with a plan on how you could make a phased retirement work for both of you.

And remember, retirement isn’t all about the dollars and cents. There’s so much more to you and your life, and planning ahead can help ensure that everything lines up the way you want it to. To get started, ask yourself:

1. What will you be pursuing in retirement?
2. Who are the people who will be in your life in retirement?
3. What places will be important to you in retirement?
4. How do you keep your health going in retirement?

If you’d like help or someone to help guide you through this process, be sure to visit our contact page to find out how you can get in touch with us. We’re always more than happy to help!