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Phased Retirement – Retiring on your schedule

The world of work has changed and you are leading that change. In ever-increasing numbers, members of the baby boom generation are rewriting the definition of retirement by exploring phased retirement, self-employment or meaningful volunteer work. But a smooth transition to retirement doesn't just happen; there are key issues and challenges to face.

Not that long ago, men and women worked to age 65 and then abruptly left the workforce for a relatively short period of enforced leisure. Today, people are “retiring” on their own timetables, living longer, and choosing to continue working in creative retirement occupations.

The good news is that retirement is becoming a segue into a new phase of life. In your mature years you have broader latitude to look for more satisfying and flexible lifestyle options. With fewer financial and family pressures, you can seek the perfect balance of work and leisure that ‘works' for you.

Working in retirement is about more than money

Phased retirement is the catch-all term for any method of gradually decreasing work time and workload instead of an abrupt move from full-time employment to retirement. It can take many forms, but usually consists of a pre-retirement gradual reduction in hours or days of work. It can also be post-retirement part-time work or volunteering for retirees who wish to remain actively engaged in life – and lots of Canadians are choosing the phased retirement option.

Many people simply do not want to slow down. Instead, they want to stay engaged through all their retirement years, to reconnect with the passions of youth, to travel, to engage in a hobby, to pursue further education. Or perhaps, to continue working for as long as they wish, at an occupation that brings happiness, a continuing sense of self-worth, the opportunity to stay connected with other people, to keep active … and to add to their income.

A survey for Investors Group brought further evidence of the escalating trend toward the “new retirement.” The poll found that 42 per cent of those in the 45 to 64 baby boom age group say they would prefer to gradually retire by working fewer hours for their current employer.*

Retiring on the installment plan – the financial effects

Phased retirement does pose some unique financial planning questions that Investors Group can help you answer before making your final decision.

Will a portion of your income come from part-time work or consulting?
If you are phasing into retirement by continuing to work for your current employer, will you be able to access your pension benefits, either in whole or in part?
If you want to continue working part-time, will your income be sufficient without Canada Pension Plan (CPP) benefits?
How will phased retirement affect employee benefits such as your supplemental health plan?
How about your health? Can you count on keeping up with the requirements of your continuing employment – especially if one of your primary reasons for working is because you need the extra income stream?
Can you expect supplementary income from your other financial resources? Talk to an Investors Group Consultant about reviewing your life insurance plans and their cash values, real estate holdings, registered and non-registered investments, annuities, long-term savings accounts and other assets to establish how much they could contribute to your retirement income on a regular basis.

Is phased retirement for you?

A phased retirement can be a great way to maintain and enhance social connections and to get more satisfaction out of your new life – but your decision to phase into retirement should be a choice, not a necessity. Having the right financial plan for the retirement path you choose can help ease the transition as well as help you make the choices that are best suited to your unique overall life plan.

Whether your vision of phased retirement includes working, volunteering or both, an Investors Group Consultant can help you retire when you want, as you want – according to your own schedule, and in your own unique way.

*Harris/Decima Survey for Investors Group, 2010.

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Written and published by Investors Group as a general source of information only. It is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax, legal or investment advice. Readers should seek advice on their specific circumstances from an Investors Group Consultant.