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How to Transition Into a “Phased Retirement” Stage

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Many companies have turned to phased retirement to address recent labor shortages. For example, Herman Miller Inc., a furniture manufacturer, offers a flex retirement plan that reduces hours for six months to two years in exchange for a commitment to teach replacements and ensure a smooth transition of knowledge.

If your employer doesn’t offer a phased retirement plan, you can still talk to them about a mutually beneficial ad-hoc arrangement. Many employers prefer to keep experienced employees around and may be especially willing to entertain the idea if you mentor a replacement. Your odds are acutely higher if you have unique skill sets.

If your employer is open to phased retirement, the next step is carefully planning your salary and benefit requirements. For example, if you want to retire before 65, you may want to ensure that your employer will provide health insurance until you’re eligible for Medicare. Private health insurance between the ages of 60 and 65 can be a considerable expense.

You should also ensure that your part-time salary is sufficient to cover your expenses. If you can, defer taking Social Security until after 65 to maximize your benefits. You should also consider the tax implications of your part-time earnings since they could impact the amount of tax you owe on income from your other retirement sources.

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