How to Retire Gradually

Not ready to stop work totally? Consider phasing in your retirement.

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A few years ago, Pat Brennan took early retirement from his position as an editor at The Toronto Star – but he didn’t intend to stop working. He was only 50 years old then and, as a widower with an empty nest, wanted to keep busy.

He had a plan for working, but didn’t want to work too hard. “As the real estate editor, I had made many contacts in the development industry so I began freelancing real estate-related articles to various media outlets,” Brennan says.

After a few years, Brennan used his contacts to get into travel writing. “I have travelled to just about everywhere in the world you can think of,” he says.

Brennan sells his stories to a variety of traditional and online media outlets and posts often on his website. These pieces don’t bring in much in the way of remuneration, he says, but that’s not the point. “I have a good pension and other retirement income from my investments so I don’t really need to make money from my travel writing,” he says. “But I love to travel and now I can do that to some of the most interesting and exciting places on earth for nothing.”

There are many people who don’t want the traditional, full-stop retirement. Instead, they want a phased-in retirement, which allows them to ease into their non-working years.

There are many people like Brennan who don’t want the traditional, full-stop retirement. Instead, they want a phased-in retirement, which allows them to ease into their non-working years. According to Municipal Retirees Organization Ontario easing into retirement can also help people get out of the house, help them maintain their skills and use the knowledge they have accumulated over their careers.

Todd Sigurdson, Investors Group Director Tax and Estate Planning, does think that a phased-in retirement is a good way to get a handle on retirement and still bring in some money. “A phased-in retirement can provide a boost to your retirement nest egg as you may not need to access it as early as you would otherwise,” he says.

If you do want to phase in your retirement, then you’ll need to consider a few things.

Financial realities

Working part time in your golden years often makes good financial sense, but it adds complexity. Consider how a small income might impact how you draw down your pension and retirement savings. “If you opt to reduce your workweek and supplement your income from your retirement assets, you will still deplete those assets but at a reduced rate,” says Sigurdson. Work closely with your financial advisor to make adjustments for your retirement income needs as you keep working.

Part-time or contract work can also impact your government benefits. If you earn too much, some benefits, such as the Old Age Security, could get clawed back to a point where you could receive very little or have those benefits completely eliminated each month.

Work options

A key issue in creating a phased-in retirement is having some viable work options. Brennan was fortunate to be able to leverage flexible work from his previous career. And freelancing is very popular: Part-time retirees can drive an Uber, do seasonal gardening work or write the great Canadian novel.

Some companies, meanwhile, will keep long-time employees in part-time or contract positions. “Increasingly, companies are seeing the value of keeping their more mature, usually very highly skilled employees on the job even if it’s for only a few hours or days a week,” says Sigurdson. “So more employers are offering their older employees various options for flexible retirement.”

Getting contracts from another company in your sector might also lead to interesting work with your old skill set. Many in business leverage their experience to serve on corporate boards.

Others may find they want to do something quite different. Retail jobs can be low stress and let you indulge in a passion, such as sports, pets or fashion.

As the years pass, many phased-in retirees will move out of the workforce entirely as health and lifestyle choices dictate a change. They often leave their final stint in the work world with robust finances, new experiences and a strong sense that they’re truly retiring on their own terms.

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