Welcome to the Ready Set Retirement Blog, my name is Derrick Glencer I am a CERTIFIED FINANCIAL PLANNER™ Practitioner. The Ready, Set…Retirement Blog focuses on the financial planning questions and concerns of Gen X Execs and Soon to Be Retirees.

Today we are going to look at phasing in retirement. This type of set up might be a good fit for Soon To Be Retirees who are currently employed, but might want to scale back on work but aren’t ready to leave for good.

Often when I ask clients what they want to do in retirement, they are at a complete loss. We work our who lives toward this goal planning and saving, but we do little in terms of thinking about what our lives will be like.

Many people are often defined by their work and because of that, a phased retirement may be a better option than just pulling the band aid off in one fell swoop.

If you aren’t quite ready to hang up the boots here are some things you should consider:

#1) Talk to your employer

Discuss if they are open to you pulling back and be sure to clarify how your role will change, whether you will shift some responsibilities to colleagues, or move to a different position suited to working fewer hours.

Hot Tip:

One of the biggest impediments to early retirement I find in my practice is the issue of Health Care. Medicare doesn’t begin until 65, so full retirement prior to that means you have to secure Health Insurance; typically in the open market. This can be expensive.

So be sure to find out how phased retirement will affect your health insurance. Many employers don’t provide coverage to part-time workers, and some who do require them to pay a higher portion of their premiums.

#2) Income Planning

To supplement your phased-retirement pay, you may consider taking withdrawals from your 401(k) plan. However, here is the catch, some plans do allow employees who are above 59½ begin taking withdrawals from their accounts, but some don’t. Be sure to talk to your Human Resource department or have your Financial Planner review your 401(K)’s summary plan description.

Hot Tip

Using your 401(K) means that likely you are not going to be contributing to the plan, or that you might not be eligible. Depending on your plan, it may mean that you are leaving money on the table in terms of the company match.

Because of that, see if the plan offers, and if you qualify, for an in-service distribution. You can then roll funds out of your plan into your IRA, and take distributions from your IRA, while remaining in the plan to take advantage of the matching contributions.

#3) Social Security

Starting at age 62, individuals can tap Social Security benefits. But doing so might hurt your finances in the long run. The longer you can delay claiming between ages 62 and 70, the larger the monthly benefit you’ll receive. In addition, Social Security penalizes many who continue to earn an income before reaching full retirement age, which is 67 for those born after Jan. 1, 1960.

Hot Tip

In 2022, for every $2 above $19,560 earned by a Social Security recipient younger than full retirement age, the Social Security Administration reduces his or her benefits by $1. In the year in which the recipient reaches full retirement age, the reduction is $1 in benefits for every $3 earned above $51,960.

Again, my name is Derrick Glencer I am a CERTIFIED FINANCIAL PLANNER™ Practitioner and this has been another episode of Ready, Set…Retirement If you enjoyed this content you can book a complimentary consultation via Calendly at: https://calendly.com/djgcfp

Or directly through email at:
derrick.glencer@raymondjames.com

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The information covered in this podcast represents the views and opinions of the Derrick Glencer and his guests and does not necessarily represent the views or opinions of Raymond James. Raymond James is not affiliated with and does not endorse the opinions or services of any of the quoted professionals or their respective firms. Expressions of opinion are as of this date and are subject to change without notice. Any examples or case studies are for illustrative purposes only. Individual cases will vary. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

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Diversification does not guarantee a profit nor protect against loss. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.