Delaying retirement or taking a phased approach to giving up work is becoming more popular. There are a huge variety of reasons why you may decide to follow this route, and they’re not all related to finances and pensions. Phased retirement could help you create a lifestyle that suits you.
Research form LV= has revealed that more adults are opting for a staggered retirement, that allows them to continue working in some form whilst having more free time. Nearly one in three (32%) of pensioners in their 60s have left their pensions untouched. For 48% of those, it’s because they’re still working. It’s a trend that’s found in the over 70s too. 16% of over-70s haven’t accessed their pension, with 24% of those not doing so because they’re still working.
Previous generations would have reached the retirement milestone and given up work completely. But today’s workers planning for retirement are often keen to embrace a more flexible option. This may mean:
- Reducing hours
- Using flexitime
- Working from home
- Choosing a less demanding role
- Opting for consultancy work
The digital age means there’s more choice than ever. Employers are increasingly embracing flexible working environments, whilst it’s possible to build connections with clients on a freelance basis too. It’s led to modern retirees having far more options as they approach the milestone.
So, here are five reasons you may want to consider a phased retirement.
1. Make your pension savings last longer
Depending on when you want to retire, your pension may have to provide an income for several decades. If your current provisions aren’t enough to provide you with a necessary income for the entirety of retirement, taking a phased approach can help. Receiving additional income from employment or freelance work can mean you’re able to leave your pension untouched for longer or take a lower income during the first years of retirement.
If you’re concerned about whether your pensions will last long enough, it’s important to understand your finance. We often find people are in a better position than they initially believe, particularly once other assets, such as property or an investment portfolio are considered.
2. Achieve the retirement lifestyle you want
Whilst your pension savings may be enough to cover the essentials, for some, it may not afford them the lifestyle you want. Phased retirement allows you to build up savings or income that can be used for the luxuries you’ve been looking forward to. It could mean more money to travel during retirement, the cash to renovate your home or the ability to provide financial support to loved ones. Phased retirement can help you meet your retirement goals.
3. You enjoy your work
Finances may play an important role in a phased retirement for some people. But for many, they’re simply not ready to give up working completely just yet. Our work and professions often provide us with identity and purpose. When we meet someone new, ‘what do you do for a living?’ is often one of the first questions asked. So, enjoying your work is more than a good enough reason to consider phased retirement.
If this is an option that’s attractive to you, it’s worth looking at how you’ll achieve the work-life balance you want. Whilst you may not want to give up work entirely, you may want to start cutting back. Balancing your working goals with those of your personal life is important for striking the right balance.
4. You like the social aspect of working
We spend much of our time at work, so it’s no surprise that it’s socially important for many people. Whether you enjoy the general office chat or have close friendships with colleagues, giving up work altogether can leave a hole in your social life. A phased approach to retirement can help you create a work-life balance that suits you whilst still keeping in touch with other employees.
5. The health benefits of working are attractive
Research shows that keeping active, both mentally and physically, can improve your health. There are, of course, plenty of ways to do this when you retire, but it’s an area work may help with. Even just a couple of days a week solving problems or being on your feet can deliver a boost. This does need to be balanced with your job role though. If your current position could negatively affect your health, it may be time to look at alternative roles.
Aligning your finances and plans
Whatever your reasons for staggering retirement, it’s important that your plans and finances are aligned.
Whilst money might not be at the centre of your plans, they will have an impact on the lifestyle you can expect throughout retirement. Phased retirement may also affect your tax liability and how you access assets, such as your pension. As a result, it’s important to keep finances and your long-term plan in mind as you make some decisions.
Thanks to improved life expectancy, it’s not uncommon to spend several decades in retirement. Whilst good news, it can make it difficult to understand how your wealth will help you meet goals through the next 30 or 40 years. This is an area of financial planning can help you with. If you’re struggling to get a grip on retirement finances, whether you want to continue working in some form or not, please get in touch. Our goal is to give you confidence as you plan a retirement that suits you.
Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.