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Should Retiring Baby Boomers Consider a Phased Approach?

Retirement Planning
retiring baby boomer who still works part-time talks with her younger mentees in a conference room

Retiring baby boomers have become a frequent subject of discussion as of late — and with good reason. Those boomers are exiting the workforce in droves, the oldest among them turning 76 in 2020.

But just as many boomers marched to the beat of their own drum in their youth, quite a few of them are diverging from their parents' footsteps by retiring much later and more gradually. In 2019, 80% of workers reported that they think they will work for pay in retirement, according to the Employee Benefit Research Institute's Retirement Confidence Survey.

Why is this happening? Here are some common scenarios:

  • Some boomers who could afford to retire when they'd originally planned to ended up seeking part-time employment for the social, physical and intellectual stimulation.
  • Other boomers were prepared to retire, and moved in that direction, but their employers enticed them into a phased retirement (in order to retain seasoned, high-performing employees in a tight labor market) and they took the offer.
  • Still others simply aren't financially equipped to go cold turkey on their paycheck, but can get by on a smaller one.

How to Phase Into Retirement

What might a phased retirement look like for retiring baby boomers? While not every variation works for everyone — and some choices are dictated by your financial circumstances — the range of possibilities can be broad.

The greatest number of options are open to you if you can afford to retire and don't mind cutting ties with your employer. You can take whatever part-time job interests you, assuming you receive an offer. You'll often find the most opportunities in fields that involve the kinds of expertise and skills you've been using over the course of your career — unless you're looking for jobs that don't require as much training or specialized skills.

Similarly, if you're able to stay with your current employer but put in fewer hours, you may be expected to remain in the same line of work. That might be because your employer is facing a talent shortage in your field and has offered you the phased retirement option to stave off a difficult hiring search. Or you may be called upon to train and mentor new, younger full-time employees.

The choices open to you might also be dictated by the specifics of your financial requirements. Suppose you've been working in a stressful but high-paying full-time job. And further suppose you only need a trickle of income as you phase into retirement. A lower-paying part-time job that's also lower in stress while still being stimulating or entertaining — like working in a museum gift shop, tutoring math students or ushering at a professional sports arena — could be the ticket. Such jobs might be easier to find than high-paying part-time positions, but you likely won't know until you look.

Balancing Income & Benefits

In some scenarios, continuing to work while collecting Social Security benefits can result in having some of those benefits temporarily withheld. If you give up employer-provided health benefits before you're Medicare-eligible at age 65, you'll need to think about how you'll fill that gap. And if you're still working at age 70½ (if you were born before July 1, 1949) or age 72 (if you were born after June 30, 1949), you'll still need to start taking taxable required minimum distributions (RMDs) from your IRA. Other financial and tax considerations might also come into play. So it's a good idea to talk to a retirement preparation professional before taking steps to help avoid any surprises that might change the financial strategy you were counting on.

Whatever your motives and ideal timeline for transitioning into retirement, don't overlook the importance of remaining socially engaged as you wind down your career. The relationships you develop with coworkers during a phased retirement, like those you built while working full-time, can stay with you throughout your full retirement. Maintaining active friendships during that period of life is important for both health and happiness.

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