Retirement Retirement Planning

9 Reasons You Should Consider Phased Retirement Instead of Full Retirement

A phased retirement offers some financial and emotional benefits compared to completely quitting work.

retired couple reviewing monthly budget
Updated Oct. 14, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

When you picture retirement, you might envision jumping into the post-work world with both feet. But while some feel nothing but excitement about ceasing all working activities, others feel a bit of apprehension.

If you are ready for a change but aren’t set on fully retiring, a phased retirement could offer the transition you need to a stress-free retirement. Here are some reasons a phased retirement might be a better fit for you.

Earn cash back on everyday purchases with this rare account

Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!1

With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!

This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.

Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.

Apply for a Discover Cashback Checking account today

You can give retirement a 'trial run'

mrwinn/Adobe Costly Medicare Enrollment Mistakes

A traditional retirement in which you leave paid work behind for good is both a big change and a major financial challenge.

Many dream of a retirement full of leisure activities. Although that’s a captivating vision, the reality is that the novelty of a full retirement often fades as the years pass.

If you opt for a phased retirement, you get to keep the best of both worlds — work and leisure — for a little while.

You can increase financial security

Cozine/stock.adobe.com retirement savings clock ticking

Retirement is an undeniably expensive undertaking. After all, you will need enough money to cover living expenses for the rest of your life. Even if you have diligently saved for retirement, rising costs can make a comfortable retirement a stretch.

When you opt for a phased retirement, you can use the income you get from working to cover some or all of your living costs. This allows you to avoid tapping into retirement savings until later, which could lead to a more financially secure retirement.

You are better able to ride out a stock market downturn

insta_photos/Adobe male broker analyzing stock market graphs

Many retirees build their nest egg through investing and keep money in stocks even after they stop working. If you are one of these folks, a downturn in your early retirement years could derail your retirement plans.

One way to avoid leaning too heavily on your investment portfolio is to continue working in some capacity so you can cover some or all of your living expenses.

If you can avoid touching your retirement portfolio during a downturn, you can wait for the market to come back instead of dipping into your nest egg as the market bottoms.

Earn $200 cash rewards bonus with this incredible card

There's a credit card that's making waves with its amazing bonus and benefits. The Wells Fargo Active Cash® Card(Rates and fees) has no annual fee and you can earn $200 after spending $500 in purchases in the first 3 months.

The Active Cash Card puts cash back into your wallet. Cardholders can earn unlimited 2% cash rewards on purchases — easy! That's one of the best cash rewards options available.

This card also offers an intro APR of 0% for 12 months from account opening on purchases and qualifying balance transfers (then 19.74%, 24.74%, or 29.74% Variable). Which is great for someone who wants a break from high interest rates, while still earning rewards.

The best part? There's no annual fee.

Click here to apply now.

You can delay filing for Social Security

JohnKwan/Adobe social security cards

When you delay filing for Social Security benefits, you can unlock a larger monthly benefit later in your retirement.

Opting to continue working in some capacity can provide the income you need to hold off on filing for Social Security benefits. Once you finally claim your benefits, you will likely appreciate the larger monthly check.

You get the opportunity to freelance or start your own business

WavebreakMediaMicro/Adobe smiling senior workers

If you don’t like the idea of continuing to work for your current employer — or in your current industry — use a phased retirement to start a business or become a freelancer.

For many, this is a wonderful way to pursue a passion and earn an income at the same time.

It can provide a sense of fulfillment

pikselstock/Adobe senior couple reviewing taxes using laptop

Many people derive a sense of purpose from work. Although you don’t necessarily need to earn a paycheck to obtain fulfillment, you might prefer to continue working on projects and causes you care about.

For example, you could choose to spend time working for a nonprofit you care about or solving a problem that matters.

You can stay socially connected

Monkey Business/Adobe A group of retired seniors who are attending an art class in a community center with a teacher during their leisure time.

Social connection is an important part of life. Whether we realize it or not, working connects us to other people.

When you leave the working world behind, you might find fewer opportunities to connect socially. A phased retirement offers a way to stay connected to your existing network of friends.

It might give you access to better health insurance

Maksym Yemelyanov/Adobe health insurace and dental care cards

Some employers offer even part-time employees access to employer-sponsored health insurance plans. That means a phased retirement could provide you with access to better health insurance at a lower price.

As you consider stepping away from work, run through your health insurance options. You might be surprised to find out that sticking with an employer-sponsored plan is your most affordable option.

You can adjust gradually to post-work life

Reese/peopleimages.com/Adobe A senior man sits next to the pool and dips his feet in

Retirement represents a significant departure from the status quo. Since many of us spend a lot of time working, leaving a job behind completely can feel very alien.

Going all-in on retirement might give you too much space in your calendar. A phased retirement allows you to assess how things are going and gives you time to make changes more gradually.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today” 
  • Create your account (important!) by answering a few simple questions 
  • Start enjoying your discounts and perks!

You’ll also get insider info on social security, job listings, caregiving, and retirement planning. And you’ll get access to AARP’s Fraud Watch Network to help you protect your money, as well as tools to help you plan for retirement.

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

Bottom line

Lumos sp/Adobe senior couple on their retirement

When you start planning for retirement, think about whether you want to take a phased retirement approach.

While this strategy might mean continuing to work in some capacity, the lighter workload will give you more space in your schedule. Plus, the continued income stream can help you preserve your retirement resources longer.

Lucrative, Flat-Rate Cash Rewards

5.0
info

Wells Fargo Active Cash® Card

Current Offer

$200 cash rewards bonus after spending $500 in purchases in the first 3 months

Annual Fee

$0

Rewards Rate

Earn unlimited 2% cash rewards on purchases

Benefits and Drawbacks
Card Details


Author Details

Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make more informed decisions. She covers mortgages, insurance, money management, travel, and more.