What is a phased retirement and is it right for you?

July 14, 2022

Throughout your life there are several major milestones, from buying your first property to getting married and starting a family.

And, of course, one of the biggest life events is your retirement, which gives you the chance to do the things you’ve always wanted to do but never had the time for.

After a lifetime of hard work, it’s important to be able to enjoy this chapter of your life to the fullest. The recent raising of the retirement age to 63, as reported in the Straits Times, may have prompted you to think about how you want to spend yours.

While the traditional “cliff edge” approach, in which you stop work suddenly, has always been the norm, taking a gradual approach has become increasingly popular in the past few years.

With that in mind, read on to find out what a “phased retirement” involves and whether it could be right for you.

This approach involves a gradual transition from work to full retirement

In the past, retirement was a very straightforward affair – you left work on the Friday and woke up on the morning of the following Monday as a “retired” person. But while this approach has some advantages, it isn’t the only option available to you.

To put it simply, a phased retirement involves slowly reducing your work hours over time, while you draw on your pensions or savings to supplement your income.

If you want to stay with your current employer, you may want to slowly reduce your hours until you’re only working part-time. Alternatively, you could stay on in a consultancy role so the company can continue to benefit from your years of experience.

On the other hand, if you want more freedom then you could consider becoming a freelancer or use your skillset to start your own business and work on your own terms.

A phased retirement can help you to enjoy a more comfortable lifestyle

There are a variety of advantages that a phased retirement can have, including:

A more comfortable lifestyle in retirement

One of the biggest benefits of this gradual approach is that you can continue to build your pension wealth until you’ve fully retired. This can mean that you’ll be able to enjoy a more comfortable lifestyle when the time comes, as you’ll have more disposable income.

This option can be especially useful if you’re concerned about whether you’ll have enough money to enjoy the retirement you want. Since you’d continue to have a regular in come for several years, you can rest easier knowing that your finances are more secure.

The satisfaction of giving something back

After a long career, you’ll have built up a vast reservoir of invaluable knowledge in your field. With years honing your skillset, and having successfully handled many high-pressure situations, your experience will be invaluable to your company.

That’s why shifting from a professional position, with all its important responsibilities, to a quiet retirement can sometimes seem a bit daunting. Taking a part-time or consultancy role can help to ensure that:

  • All the valuable knowledge you’ve gained throughout your career won’t go to waste
  • The next generation can benefit from your years of experience
  • The transition from work to full retirement will be a gentle one.

Mental health benefits

Another important benefit of opting for a phased retirement is that it can help you to stay in touch with old friends and colleagues from work. If you’re used to the hustle and bustle of a busy office, a sudden and quiet retirement can sometimes seem quite lonely in comparison.

Working in a part-time role can help you to stay social, meet new people, and ward off loneliness so you can enjoy your retirement to the fullest.

Speak to your financial planner can help you to weigh up this important decision

Of course, it’s important to remember that this approach isn’t for everyone, as a phased retirement can have some drawbacks too.

One of the biggest issues is that since you won’t be fully retired for many years, you won’t be able to do whatever you want, whenever you want to. As you might imagine, it can be very hard to take a 6 week long trip around the world when you’re expected back in the office on Monday morning!

Furthermore, depending on how much income you earn from your part-time work, there could be potential tax issues to consider, especially if you are spending significant periods of time in multiple jurisdictions. That’s why, if you’re considering a phased retirement, it can be useful to seek professional advice first.

Working with a financial planner can help you to properly assess your retirement plans and decide how you want to spend this important chapter of your life. We can also act as a useful sounding board before you make any important decisions, as well as offer valuable guidance to help you manage your money in the most effective way.

Being able to make an informed decision about your retirement can give you a greater sense of confidence that you’ll be able to enjoy it to the fullest.

Get in touch

If you want to know more about whether a phased retirement could be right for you, we can help. Either contact your financial planner directly, email us at hello@ascentawealth.com or fill in our online contact form to organise a meeting and we’ll get in touch.