Should You Explore Phased Retirement?

Have you wished for something between full-time work and retirement? Phased retirement programs allow workers nearing retirement age to cut back on hours while keeping some pay and benefits. The pandemic opened bosses to flexible work arrangements. And now, a fierce hiring market and higher-than-expected retirement rates have motivated them to find ways to retain older workers with key skills. Phased retirement offers many benefits, but it can be complicated. Considerations include the age at which you plan to retire and your employer. This period can provide a trial run for the rest of your life.

Let’s face it: Despite our lovely dreams of golf, beaches and Broadway shows, our jobs and workplace provide a kind of social life, giving us a sense of community. A phased retirement arrangement lets you start experiencing what living without work would be like.

You know what’s coming next — having enough money to last through your nonworking life. Phased retirement helps make that transition from post-work life with an additional stream of income to continue funding your retirement plan.

You’ll be able to engage in some of the pleasurable perks of retirement, which you may have been unwilling to do if you just relied on your retirement account. You’ve conditioned yourself to save and not spend, but if you maintain some employment, you’ll be granting yourself a sense of comfort in spending the money you’ve worked hard to save. Plus, with income from a part-time job, you may be able to avoid drawing Social Security benefits too early.

Financial advisers say phased retirement programs can provide financial and psychological benefits, but potential legal and financial complications loom.


  • You can help train the employee who will eventually take your place.
  • For firms concerned about losing a lot of institutional knowledge and intellectual capital, such a program gives time to recruit and train a successor before an employee retires.
  • Employers can help facilitate seamless transitions by encouraging retiring employees to participate in succession planning, training, mentoring and encore career opportunities.
  • Phased retirement can be a powerful employee retention tool.


  • The rules of some pension and 401(k) plans can create complexities. People phasing into retirement may want to tap their retirement benefits to supplement a lower paycheck. Many employers allow employees ages 59-1/2 or older to tap into their 401(k) accounts without penalty, but some don’t.
  • Companies can amend their pension plans to allow workers to make partial early withdrawals, but it can backfire if it encourages more people to retire early.

Think of the future

Many workers envision a flexible transition into retirement. But employers need to have options in place to support them. Companies could look at it as a way to slow the brain drain and manage talent shortages, finding a way to leverage rather than lose that level of experience. Employees can ask to be hired as independent contractors and make their own work schedules. If you start a new business, you may continue to build retirement savings using a Simplified Employee Pension or solo 401(k) plan.

About 38% of employers surveyed by Mercer LLC are offering some type of phased retirement program. Another report by Transamerica Institute says that about 46% of employers offer one or more work-related transition programs, 41% enable their employees to reduce hours and shift from full time to part time, and 35% offer their employees less stressful or demanding jobs.

Workers can look for ways to ease into retirement and keep some pay and benefits. People have the potential to live longer than ever before, prompting a rethinking of workforce time relative to retirement. The phased retirement trend is likely to continue because it can be beneficial to both employees and employers.

Reach out to Roz Carothers and her team at Triplett & Carothers to learn more.