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Tags: finance, retirement planning, phased retirement may be for you
 For most of us finally stepping away from the rat-race is the culmination of our life’s work. It’s what we strive for—a place in the sun to spend our golden years. But for some, suddenly going from 100 to zero just isn’t what the doctor ordered. There are many reasons why older worker may want to continue working—they need the money, they want to stay mentally and physically active, or they want to remain productive as long as they can.
A good number of them prefer to slowly ease their way into doing nothing. And with the current economic situation companies have found that it’s getting difficult to hire workers with the skills needed to at least approximate those who are retiring. In order to handle both issues of retirees and companies, having a phased retirement program is a way to retain older workers while at the same time facilitate their transition into their golden years.
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Phased retirement is typically any program that “allows for a gradual decrease in working time and workload instead of an abrupt move from full-time employment to retirement.” Phased retirement programs are usually found in public, non-profit, and/or academic institutions as tax codes may make it harder for the private sector to accommodate such a plan although the IRS may be looking into this situation.
From an employer’s viewpoint, a phased retirement program can retain skilled older employees who can still work why they find and train their replacements. They still retain access to the knowledge and experience of these workers for a lower cost since the retirees work part time at reduced salaries. For those retiring, phase retirement programs allows them to gradually lower their work load, lower their working hours, and transition themselves to eventually do nothing.
However, before deciding that phased retirement may be for you, look at the potential pitfalls as well. If you have a pension plan going from full time to part time may affect the benefits you will get. Since pension benefits are calculated based upon your years of service and salary during the final years of employment, going part time and with a cut in pay “could reduce your final average salary calculation and reduce your long-term pension benefit” according to Keith Brainard, research director for the National Association of State Retirement Administrators.
Before you do sign up for the plan you need to find out how it will affect your pension calculation. At the same time, such phased retirement plans may make you ineligible for the health care plans of your employer. Unless you are already eligible for Medicare, this could hit you financially through higher health care costs.
And much like how it affects your pension, entering into phased retirement may also affect your social security benefits if the time you are in the plan becomes part of the earning calculation and you have a lower salary because of it. This is only true if you are not fully at the government mandated legal age for retiring yet.
Depending on the workplace, phased retirement may be done as part of a management plan or on a case to case basis. If you’re looking into availing of this program I recommend not only going to your company’s human resources but also to a financial consultant who can discuss the financial implications of the plan.
Who knows, it may be a winning plan for you.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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