As we approach 2026, we envision what the new year will bring. This is a time of change and reflection, and for people in their 50s and 60s, this could include shifting away from full-time work. Retirement is often portrayed as a one-time switch from a life of work to a life of leisure. However, another approach, phased retirement, has become increasingly popular with retirees.
Phased retirement is a gradual change from full-time work into retirement, providing a smoother transition into the next chapter of your life. In practice, this might involve part-time work or consulting, starting a new job in a related field, volunteering, or mentoring. Choosing to retire in phases can have both financial and non-financial benefits.
Financial Health
Many people approaching retirement are worried about outliving their resources. A phased retirement that brings in income, even if a fraction of your high-earning years, can extend the longevity of your savings, since every dollar earned is a dollar not taken out of your retirement portfolio.
Jennifer was focused on retiring from her demanding career in law as early as possible. When her financial advisors worked with her on her retirement plan, they discovered that she risked running out of money in her later years. Despite this possibility, the stress of her job was too much for her to sustain, and she decided to retire early. To address the risk, she found a part-time job teaching legal writing, an area she had been passionate about throughout her career. Although she earned significantly less than before, her financial projection improved as a result of this income.
There are other financial benefits of phasing into retirement. For example, maintaining access to health insurance is a potential advantage of continuing to work until you enroll in Medicare at age 65. In addition, many people claim their Social Security benefits as soon as they retire, regardless of age. However, claiming benefits later is often beneficial for people who can afford to do so. This is because benefits grow for every year you wait to claim, up until age 70. Phased retirement provides a way to bridge the income gap while waiting to maximize Social Security benefits.
Physical and Emotional Health
People are living longer and are staying healthier longer. Although not everyone can do so, older adults who continue working past age 65 can also derive physical and emotional health benefits.
Nancy retired a few years ago from a long career as an executive. After decades of going to the office, she suddenly had no structure to her day. With no built-in socialization, she felt lonely and isolated, and the label “retiree” erased her identity and place in the world. Although she did not miss the constant demands on her time and energy, she yearned for the mental challenge and community of her previous life. After spending several months traveling, she reflected on her experiences and started a new part-time job working for her town’s city council. She felt energized by this new role and quickly found that the work helped her feel more connected to her colleagues and community.
Rebuilding routines through part-time work, new hobbies, volunteer work, or other structured activities can open new communities and provide a sense of purpose, leading to a new and fulfilling identity. In fact, research shows that working longer can keep your brain sharp and help you maintain social connections [1], and can even lead to an increase in life expectancy.[2]
Easing Into Your Next Chapter
While Jennifer’s and Nancy’s stories above are fictional, they are also increasingly common. Retirement planning often starts with finances but ends with a deeper conversation about values, lifestyle, and what matters most in life. A phased retirement can smooth the transition away from working full-time, offering physical, emotional, and financial benefits. At North Berkeley, we help our clients envision their next chapter, so they can make decisions with clarity and confidence.
Resources
[1] National Poll on Healthy Aging Team. The Intersection of Work, Health, and Well-Being. University of Michigan National Poll on Healthy Aging. January/February 2025.
[2] Zulkarnain, Alice and Matthew S. Rutledge. 2021. “Do Men Who Work Longer Live Longer? Evidence from the Netherlands” Issue in Brief 21-8. Chestnut Hill, MA: Center for Retirement Research at Boston College
