More employees want to combine some work and retirement. Four ways to get started

Personal Finance

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When it comes to retiring, few people want to quit work cold turkey.

Close to 6 out of 10 workers around the world would like a phased transition — a gradual shift from full-time work into part-time or freelancing — as they enter retirement, according to a survey from the Transamerica Center for Retirement Studies.

The institute, along with the Aegon Center for Longevity and Retirement, polled a global sample of 16,000 workers and retirees.

Done right, a phased transition to retirement can be a win-win for employers and workers. Seasoned employees continue to shore up their finances and hold off on tapping their retirement savings and Social Security a little longer.

Meanwhile, employers benefit from keeping their most experienced workers on board — perhaps even at lower cost if those people opt to reduce their hours or become freelancers.

As much as workers would like to gradually step away from the workplace, few employers offer such a program.

Only about a third of employees said their employers offer a “phased retirement” option, the survey found.

“Many employers are running lean and mean,” said Catherine Collinson, CEO and president of nonprofit Transamerica Institute. “They may be missing an opportunity to open up these flexible transitions into retirement.

“The downturn and the pandemic are catalysts for change as we’ve never seen before in our lifetime,” she added.

Here are four steps to follow if you want to go that route.

1. Research your firm’s transition program

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Having an “age-friendly” employer could help smooth the transition from full-time to part-time work.

Many firms “have a diversity and inclusion statement, but few cover all of those characteristics and age,” Collinson said.

Such a workplace would include mentoring programs and workplace benefits that are tailored for employees of all ages, she said.

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They would also be inclined to offer a flexible work arrangement — including shorter weeks or tailored hours.

“The benefit to the employer is succession planning, training and mentoring so when they fully retire, there’s a seamless transition and the successor fills their shoes,” said Collinson.

2. Be discreet

Talk to your colleagues, including those who have successfully transitioned into part-time work and retirement, and ask them how they did it.

Don’t tip off your employer before you’re ready.

“You’re looked at as less loyal, and they’re less likely to invest in you as an employee,” said Collinson. “You could miss out on raises and promotions.”

It doesn’t hurt to look for Plan B, including burnishing your LinkedIn page and seeking out other roles.

“Look at the possible opportunities that may lie either in freelancing or contracting through digital platforms or on your own,” said Collinson.

3. Get a financial reality check

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Meet with your financial advisor and take stock of your savings, including your retirement account, as well as your debts.

You’ll want to squash high-interest debt before you leave the workplace for good, as it eats up cash flow.

“Acknowledge whether you’re saving enough and is it adequate to last through retirement,” said Collinson.

This is also a good time for a gut check of your portfolio allocations, provided you’re doing it alongside your financial advisor.

“Keep perspective and avoid knee-jerk reactions,” said Collinson. “An account balance that looked great on Dec. 31, 2019 might not look so great right now.”

4. Understand your health benefits

Whether you’re lobbying to cut your hours at work, are pushing for a freelance position or want to retire altogether, it’s going to affect your health-care coverage.

Pre-retirees who are approaching age 65 have even bigger questions to consider: If they keep on working and maintaining coverage at the office, what will that mean for Medicare enrollment?

Generally, employees at firms with fewer than 20 workers must sign up for Medicare at 65.

Meanwhile, those at larger firms can opt to keep their workplace coverage and delay Medicare. They can also choose to go on Medicare and drop their coverage at work or do some combination of the two.

“Look before you leap to make informed decisions that work for you, your family, your health situation and your finances,” said Collinson.  

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