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The federal government recently established a formal phased retirement program that allows eligible full-time federal employees to collect half their pensions while working half-time; at least 20% of their remaining work hours will be spent mentoring younger workers.

Phasing Into Retirement

Only 11% of companies in the private sector offer some form of phased retirement, but there seems to be growing interest.1 If your company does not offer such a program, you might suggest an arrangement that could be beneficial for all concerned. Here are some ideas to keep in mind.

  • Make sure you understand the effect of reduced hours on your benefits, such as health insurance and employer pension or retirement plan contributions.
  • Because pensions are less common in private industry, you may have to supplement your lost income. If you claim Social Security before full retirement age and continue to work, not only will you receive a permanently reduced benefit but you’ll be subject to the “earnings test,” which may temporarily reduce your benefit until you reach full retirement age.
  • A moderate phaseout program, such as working four days instead of five, might allow you to try living on 80% of your income without tapping other sources. This could be good practice for retirement.
  • If you do phase out of your current job, make sure you don’t end up trying to do all of your former work in fewer hours!

Retirement should be a positive experience after a long working career. By taking a practice run or a phased approach, you may be more comfortable as you move into an exciting new stage of your life.

1), March 10, 2015

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Freeman Owen, Jr - Host of SAFE MONEY TALK on CBS The Big Talker 1580AM