Phased Retirement?

Jan 16, 2026

As we confront the possibilities and inherent challenges of living longer in an ever more expensive world, the notion of a “full-stop” retirement at say, 60 something, has started to feel downright quaint. The rising cost of living, and the possibility of needing care in older age, make setting a retirement date very scary. Money aside, a myriad of research reinforces how using our minds, staying active and having strong social connections is critical for healthy aging. Taken together, these trends explain the appeal of phased retirement. Read on for insights on how phased retirement creates a bridge between full-time, full-on employment, and full-time retirement, benefitting both employers and employees.

Longevity Requires New Plans

At Forbes, Dr. Joe Coughlin from the M.I.T. Agelab wisely points out: “We often talk about longevity as a gift of extra years granted by science, medicine, and better living. But increasingly, longevity looks less like a windfall and more like an operating expense, something we actively manage, maintain, and pay for over time.” The obvious way to pay for living longer is to continue working well into our older years. Of course not everyone wants to work, and work, and work some more, and not every employer welcomes older employees. A phased approach to retirement can be pragmatic, and is likely to become more common. Properly managed phased retirement can be a win-win in the workplace, since younger and older workers have so much to learn from each other.

There’s no one way to do phased retirement, so ideally employees will have opportunities to explore phased retirement as they develop their plans for older age—-and build their savings throughout the working years. Clearly, employee sponsored retirement plans are ever more important in this effort, and ideally, include access to high quality financial planning advice. Noting that until fairly recently, retirement has been fundamentally thought of as a point at which we completely stop working, Investopedia shares this overview of traditional and phased retirement:

The traditional retirement age is 65 in the United States. The full retirement age (when you can collect full Social Security benefits) is 66 or 67 years old, depending on your birth year. The early retirement age is 62 (the earliest age you can collect Social Security benefits). Typically, 40% of pre-retirement income comes from Social Security for those who decide to retire early. If you delay collecting Social Security until age 70, you will receive the maximum benefit.

A phased retirement includes a broad range of employment arrangements that allow an employee who is approaching retirement age to continue working with a reduced workload, and eventually transition from full-time work to full-time retirement. Phased retirement may include a pre-retirement, gradual reduction in hours (or days) of work, then post-retirement, part-time work for pensioners who wish to remain employed. Part-time, seasonal, and temporary work or job-sharing are all work arrangements that can be a form of phased retirement.

Retirement Plan Sponsor?

Excellent! Thank you for helping us all save for potentially long lives! Don’t forget to maximize engagement in the plan by tailoring messages for the different generations at work in your business. Increasing access to financial advice and planning is another important way that you can help employees from every generation progress toward their goals.

Don’t forget to take a minute and make a wise move for yourself as a plan sponsor too. The standards and stakes are high for ERISA fiduciaries, and even if you have done nothing wrong, being hit with an allegation is costly and disruptive, putting your business and personal assets at risk: ERISA defense costs upwards of $600—per hour.

Keep in mind that outsourcing plan services and administration can reduce some of the risks inherently associated with retirement plan sponsorship, but under the high standards of ERISA, plan sponsors remain fiduciaries. Specific examples of what you can be held personally accountable for as a fiduciary include:

Decisions: Do you have the right advisor, and investment options?
Cost control: Are the plan fees reasonable and services solid?
Compliance: Do operations adhere to the plan document, and government regulations?

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