Is Phased Retirement Right for You?
Transcript of Podcast Episode 274
Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, is phased retirement right for you?
The concept of retirement has changed dramatically over the last few decades. The rise of the 401(k), the fall of the defined benefit pension, longer life expectancies and COVID-19 have all played a role. And what does retired life look like these days? It’s not what it used to be, and a recent survey by Principal Financial confirms it.
The study, published at the end of 2023, has some surprising findings.[1] For one, a majority of workers (52 percent) would prefer to retire gradually rather than all at once or at a specific age. This evolving trend is most pronounced in Millennials (normally defined as born between 1981 and 1996), and Gen X workers (born between 1965 and 1981). It is less pronounced in Baby Boomers (born between 1946 and 1964) and Gen Z workers (born between 1997 and 2010).[2]
Employers are taking notice. According to the study, 61 percent of businesses have worked with their employees to do a phased retirement plan.[3]
Another interesting trend is the age at which most people would prefer to completely retire. It seems that the older you are, the later your preferred retirement date. Boomers say they’d like to retire at age 68. It’s 64 for Gen X, 59 for Millennials, and 55 for Gen Z. The overall average is age 65. Note that this is the age when Medicare benefits begin for most people. Full Social Security benefits don’t normally begin until age 67.[4]
There are certainly some benefits to phased retirement. For one thing, it’s almost a rehearsal for your real retirement. Furthermore, since you’re still getting a (presumably reduced) paycheck, it aids your financial stability. And it may also help with the feeling of loss some people have when they wake up one day without a job.
It’s certainly true that at almost every age, retirement is something people think about, a lot. According to the Principal study, employees say that saving for retirement is their highest financial priority, ahead of affording basic needs, paying off consumer debt, building an emergency fund and saving for home ownership.[5]
Is phased retirement the right approach for you? You may need help to figure this out. How much have I saved so far? Do I need to downsize in retirement? How much are taxes going to cost me in retirement? Should I collect my Social Security early, or can I afford to wait?
Getting your own financial priorities straight is one of the most important things you can do. Your Security Mutual Life insurance advisor can help you sort through your options and help get the process started. Your advisor will assemble your team and coordinate with your attorney and tax professional to review your situation to determine the plan and strategies that are appropriate for you and your family.
[1] Principal Financial Services, Inc. “Principal Financial Well-Being Indexsm, 2023 Wave 3.” principal.com. https://secure02.principal.com/publicvsupply/GetFile?fm=EE12576A-0&ty=VOP&_gl=1*dasal8*_ga*MTIzNTkzNzUyMy4xNzA4OTc5MzI4*_ga_GP3ZP21MGH*MTcwOTA0MzA4Ny4yLjEuMTcwOTA0NDk1Ni4wLjAuMA (accessed Feb 27, 2024).
[2] Cotrell, Sarah. “A Year-by-Year Guide to the Different Generations.” parents.com. https://www.parents.com/parenting/better-parenting/style/generation-names-and-years-a-cheat-sheet-for-parents/ (accessed Feb 27, 2024).
[3] Principal Financial Services, Inc. “Principal Financial Well-Being Indexsm, 2023 Wave 3.” principal.com. https://secure02.principal.com/publicvsupply/GetFile?fm=EE12576A-0&ty=VOP&_gl=1*dasal8*_ga*MTIzNTkzNzUyMy4xNzA4OTc5MzI4*_ga_GP3ZP21MGH*MTcwOTA0MzA4Ny4yLjEuMTcwOTA0NDk1Ni4wLjAuMA (accessed Feb 27, 2024).
[4] Principal Financial Services, Inc. “Principal Financial Well-Being Indexsm, 2023 Wave 3.” principal.com. https://secure02.principal.com/publicvsupply/GetFile?fm=EE12576A-0&ty=VOP&_gl=1*dasal8*_ga*MTIzNTkzNzUyMy4xNzA4OTc5MzI4*_ga_GP3ZP21MGH*MTcwOTA0MzA4Ny4yLjEuMTcwOTA0NDk1Ni4wLjAuMA (accessed Feb 27, 2024).
[5] Principal Financial Services, Inc. “Principal Financial Well-Being Indexsm, 2023 Wave 3.” principal.com. https://secure02.principal.com/publicvsupply/GetFile?fm=EE12576A-0&ty=VOP&_gl=1*dasal8*_ga*MTIzNTkzNzUyMy4xNzA4OTc5MzI4*_ga_GP3ZP21MGH*MTcwOTA0MzA4Ny4yLjEuMTcwOTA0NDk1Ni4wLjAuMA (accessed Feb 27, 2024).
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