As the world of work continues to evolve, more Americans are considering semi-retirement as a viable option. The 2024 State of Retirement Planning study by Fidelity Investments found that the rise of remote and hybrid work has shifted retirement preferences for individuals under the age of 42. With 66% of Gen-Z and Millennials looking to phased retirement and 57% of respondents planning to work part-time in retirement, it’s clear that semi-retirement is becoming increasingly popular among younger generations.
For many investors, transitioning into retirement with a phased approach can have numerous benefits. Retiring from a current career can provide more time to focus on passion projects, travel, or simply enjoy a change of pace from a stressful work environment. Semi-retirement offers the flexibility to decide when and how much to work, providing a sense of financial freedom that may have previously been lacking. Additionally, semi-retirement can help individuals make retirement work financially, as 37% of respondents in the Fidelity study unretired to cover essential expenses.
Moreover, a phased retirement can also help individuals with the emotional transition into retirement. Retirement is a major lifestyle change, and many individuals are so focused on the financial aspect of retirement that they fail to consider what they will actually do in retirement. Finding purpose, structure, and intellectual stimulation in retirement is essential, as feeling needed at work can provide a sense of fulfillment. Semi-retirement allows for more free time to explore interests, hobbies, and new opportunities, making the transition into retirement smoother and more enjoyable.
Financial planning is crucial for those considering semi-retirement. Understanding your expenses is key to ensuring you don’t run out of money in retirement, as expenses drive the level of savings required to support your lifestyle. Health insurance is a critical factor to consider, especially if retiring before age 65 and Medicare eligibility. Income to meet expenses, bridging the gap until Social Security benefits begin, and considering ways to use your strengths and skills to generate income are all important aspects of financial planning for semi-retirement.
Starting to plan for retirement early can provide flexibility and options later in life. Many workers lack specific goals around retirement, but taking steps to understand lifestyle expenses, evaluate financial and tax strategies, savings rates, and other aspects of financial life can pay off in the long run. As goals and priorities change over time, having financial flexibility and optionality can be incredibly valuable. By considering semi-retirement as a viable option and planning accordingly, individuals can transition into retirement smoothly and enjoy the benefits of a phased approach to retirement planning.
