Retirement doesn’t have to be an abrupt change from a full-time job to a life of leisure. Some people switch to a part-time job or pursue self-employment for a few years before settling into a more traditional retirement, according to a new Government Accountability Office analysis of Federal Reserve data. Here are some paths into retirement to consider.
Gradually cut back hours. You may be able to decrease the time you spend at the office by working fewer hours per day or cutting back to four or three work days per week. Some 15 percent of retirees say they worked fewer hours as they got closer to retirement, GAO found. Another 8 percent of workers approaching retirement say they would be interested in cutting back their time at work in the years leading up to retirement. A Society for Human Resource Management survey found that only 4 percent of employers offered a formal phased retirement program in 2014 that provides a reduced schedule or responsibilities in the years before retirement, and 9 percent of employers say they make informal phased retirement arrangements. In the absence of a formal program, phased retirement is often negotiated on an individual basis.
Downshift to a part-time job. Income from a part-time job can allow you to withdraw less from your retirement savings each year or pay for some luxuries you would be hesitant to purchase while on a fixed income. Some 14 percent of retirees retired from one job and then found another part-time job, and another 18 percent of workers approaching retirement are also interested in doing this, GAO found. Many part-time jobs also come with social perks, such as getting to chat with customers or clients and invitations to company social events with colleagues.
Switch to a new full-time job. Finding a new full-time job can be necessary when you haven’t adequately saved for retirement, spent your existing savings too quickly or to acquire affordable health insurance if you retire before you are eligible for Medicare. Some 6 percent of people say they retired from one job and later found another full-time job, likely out of financial necessity. However, in some cases, retirees return to work because they miss the action and sense of purpose they experienced in the workplace. However, only 2 percent of workers approaching retirement say they want to continue to work full-time after retiring from their current position, GAO found.
Work for yourself. If you still need to continue to earn income, but are tired of reporting to a boss, self-employment can be the solution. Some 8 percent of retirees retired to pursue self-employment, which is similar to the 9 percent of workers who want to work for themselves in retirement, GAO found. Work can be less stressful when you get to choose when and how you work, and you get to keep all the profits your efforts generate.
Traditional retirement. Jumping into full-time retirement will give you an immediate influx of leisure time, but can also be an abrupt transition for people who are used to being constantly busy. Only 18 percent of workers between ages 55 and 64 think they will be able to follow this traditional path into retirement, but over half of retirees (59 percent) say they stopped working directly after leaving full-time employment, GAO found. When you retire is not always within your control. We like to think that we will get to pick the date we will retire and enter our retirement years with a plan to relax more and spend time on the things we truly want to be doing. But the path to retirement is often interrupted by layoffs and health problems that force people out of their current jobs and into retirement. Traditional retirement can be a wonderful experience for people who have their finances in order and plans for hobbies and volunteer work, but an unplanned early retirement can be a constant financial struggle that is difficult to cope with.
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