You may have spent decades saving for retirement, waiting for the day when you could step back from long hours at work and do what you want with your time. But stopping work entirely can be difficult, especially if you love certain aspects of your job.
Phasing into retirement—continuing to work part-time, even for just a fraction of your original salary—can provide the perfect balance and make a big difference in your retirement security. The option is increasingly popular: A 2023 survey by Principal Financial found that more than half of workers want to gradually reduce their hours before they eventually stop working.
Flexible retirement can look very different from person to person. Some people retire from their full-time job and do consulting work in a related field or contract work for their former employer. Others switch to another type of work—taking a part-time job with a nonprofit or a business they’ve always been interested in, for example, or exploring flexible gig work.
Some others continue to work part-time for their longtime employer, and they may even get health insurance, participate in the 401(k) and receive other benefits if they work a certain number of hours each week. “A lot of companies are moving in that direction because there’s a benefit to keeping the institutional knowledge that long-tenured, loyal employees have,” says Judith Ward, a certified financial planner with T. Rowe Price.
Ward knows about phased retirement from experience. After decades of helping clients prepare to retire, she wasn’t sure what she wanted to do next as she was approaching age 60. “I was agonizing about not knowing what I would do in retirement, even though I knew I wanted to move in that direction,” she says. “I wanted to go part-time and have time to figure it out.”
Ward asked her employer about her options. She discovered that she could still qualify for employee health insurance if she worked at least 20 hours per week and that she could continue saving in the company’s 401(k), too. Last October, she cut back to working 2½ days each week, and she couldn’t be happier. “It’s more comfortable to work longer in this way than with the grind of full-time work,” says Ward, now 61.
If you work for a company that is willing to consider it, you may have a better shot at getting the terms you want if you approach your manager well before you’re ready to scale back. Have a plan in mind beforehand so you’re ready to explain how you can do your job part-time and continue to add value to the company. If your employer isn’t thrilled with the idea, you’ll have plenty of time to decide whether to continue working full-time or to think of another way to cut back. “Over the course of the year, you can try to network or have something lined up,” Ward says.
Ward also recommends talking with the human resources to learn about the impact on your benefits, such as health insurance.
