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.

By Sarah Sharkey

Edited by Chris Kissell

Updated Jan. 22, 2025

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.

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You can give retirement a 'trial run'

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.

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You can increase financial security

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've 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

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.

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You can delay filing for Social Security

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

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

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.

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You can stay socially connected

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

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

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.

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Bottom line

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.

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