Our retirement plan advisors often field questions about the shift from working full-time to retirement. It can be an abrupt change, and many clients wonder if there's a way to transition more gently and gradually into the golden years.
If you've ever considered simply cutting back hours or going down to part-time for a few years before making the retirement plunge, you're definitely not alone. A 2013 survey of 16,000 workers and retirees in 15 nations found that more than 33 percent of Americans would prefer to semi-retire, rather than completely retire.
Other interesting statistics from the survey include that:
- Semi-retirement is popular among a younger demographic; 43 percent of 25- to 34-year-olds and 41 percent of 35- to 44-year olds hope to semi-retire
- 27 percent of 45- to 54-year-olds want to semi-retire
- 19 percent of 55- to 64-year-olds currently consider themselves semi-retired
What motivations underlie this growing trend?
Semi-Retirement: The Confluence of the Personal and the Professional
The reasons for a growing preference for semi-retirement range from the personal to the financial, but all are based on a desire for a gradual, more gentle, transition. After all, abruptly leaving the workforce, where you've spent at least 40 hours per week -- and often much more -- for the past several decades, can certainly be a jolting experience. Some even might describe it as "culture shock."
For many, a career forms a basic facet of identity. Consider that one of the first questions asked when meeting someone new is usually, "So, what do you do?" The answer often helps to define how you perceive yourself, as well as how others perceive you. When you retire, suddenly that connection to the working self is severed, often leaving feelings of loss and identity confusion in its place.
Easing into retirement gradually mitigates some of these feelings of loss and confusion. You'll still spend some of your time at work, doing what you know best, but you'll also have free time to explore other interests and decide what path your life will take next. Perhaps that's why the survey found that 39 percent of workers feel that gradually cutting back hours will make the transition to retired life easier to handle.
Other personal reasons noted in the survey include a desire to continue working part-time because:
- Work is enjoyable -- 41 percent of respondents
- Work provides mental stimulation -- 51 percent
- Work offers a way to stay active -- 51 percent
- Work provides a feeling of relevance or importance -- 19 percent
Should You Add Semi-Retirement to Your Comprehensive Financial Plan?
For others, financial motivations come into play. Almost one-third of respondents noted that their retirement savings were inadequate and that they simply couldn't afford a full-time retirement, so chose to continue working part-time to build their nest egg. For 20 percent, a lack of retirement income necessitated continued work in order to supplement income and continue receiving benefits.
Some workers noted that debt load required them to continue working part-time into retirement. Others experienced unexpected costs, such as supporting family members or medical bills, that kept them on the job longer than planned. Some were even forced into semi-retirement through workforce cutbacks or poor health.
If you're considering semi-retirement, your retirement investment advisor will help you sort through the financial implications of making a gentle, gradual transition into retired life.