The Retirement Trend Among 60-Year-Olds Experts Say Is Actually Smart

If your image of retirement involves abruptly walking out of the office forever with a gold watch and a sheet cake, you might be operating on an outdated model.

A growing number of Americans are embracing "phased retirement" instead. Rather than quitting cold turkey, they gradually reduce hours or move into less stressful roles before fully exiting.

According to Bureau of Labor Statistics (BLS) data, nearly one in five Americans over 65 was still working in 2024. Many are working by choice.

Here's why financial experts think a phased approach may be a smart money move for seniors, along with tips on how to talk to your employer about phasing out your own retirement.

Prolong your retirement savings

One of the biggest advantages is simple math: the longer you delay pulling from retirement accounts, the longer your investments have to grow.

Part-time income reduces pressure on your portfolio during critical early years of retirement, when large withdrawals can do lasting damage.

Delaying Social Security to increase benefits

Many Americans claim Social Security early because they feel compelled to stop working. Phased retirement can create breathing room.

If you delay claiming benefits until age 70 instead of taking them early at 62, your monthly benefit can increase substantially. That larger guaranteed monthly income can matter a lot later in life.

Employer health insurance can bridge the Medicare gap

Health care costs are among the biggest retirement stressors.

Phased retirement may allow workers to keep employer-sponsored health insurance longer before transitioning to Medicare at 65. That can help avoid expensive private insurance plans or ACA marketplace coverage during gap years.

Continuity helps ease the transition

Retirement sounds relaxing until every day starts feeling like an unplanned Saturday.

Jobs provide structure and social interaction. A phased transition gives people time to gradually build a new lifestyle rather than suddenly trying to reinvent their identity overnight.

This continuity can be particularly important for people who live alone.

Mental health matters

Several studies have linked retirement transition to depression.

A study in the Journal of the American Geriatrics Society (AGS) reports a 6.2% depression rate among recent retirees aged 65 and older.

Volunteering can buck the trend, as purposeful work (paid or unpaid) can improve mental health. AGS research finds that seniors who volunteer have 43% reduced odds for depression compared to seniors who do not.

Gradually reducing work responsibilities may have the same effect. It can soften the transition and maintain a sense of purpose.

Employers want experienced workers to stay

The market has shifted. Many employers no longer want veteran employees to disappear overnight and take decades of institutional knowledge with them.

And increasingly, Americans want to work into their 70s.

Many smart employers allow phased retirement so older workers can mentor younger staff, assist with training, or provide consulting support without remaining full-time.

You may have more negotiating power than you think

Many workers assume phased retirement requires a formal company program, but that's not necessarily the case.

According to the Society for Human Resource Management (SHRM), 6% of employers offer a formal, phased retirement program, while 15% offer informal phased retirement.

That 15% figure has grown steadily in recent years. Longtime employees may be able to negotiate bespoke arrangements for reduced schedules, remote work, seasonal work, or project-based consulting.

Retirement is getting more expensive

The "traditional" retirement model was built around shorter lifespans and lower health care costs.

Housing, insurance, travel, utilities, and medical costs have climbed sharply. Earning even a modest income during early retirement can reduce financial pressure considerably.

The Department of Labor (DOL) recommends that today's retirees plan for savings and investments to last at least 30 years.

Not all people are ready to stop working

Not everyone dreams of endless rounds of golf.

SHRM findings show that only 47% of older workers want to retire. Instead, 33% want to continue working as is, and 20% want to continue working at reduced hours.

Some people genuinely enjoy parts of their careers and want to keep going, especially if they can transition away from exhausting schedules.

Smoother emotional transition for couples

Retirement disrupts household dynamics.

When one spouse suddenly goes from working 50 hours a week to being home constantly, it can create tension and identity shifts for both people.

A phased approach often gives couples more time to adapt gradually to new schedules and expectations.

Test-drive retirement before fully committing

Scaling back work hours lets people experiment with retired life before making a permanent decision. 

Some discover they love full retirement. Others realize they want more structure, income, or engagement than initially expected.

How to negotiate a phased retirement

Jen Springer, a Minnesota-based HR consultant, says employers are increasingly open to phased retirement because "it's a win-win."

It allows companies to "maintain industry and corporate knowledge in a safe way as they level up younger generations in the workplace."

If you want to pitch a phased exit to your boss, Springer says, "Come up with a plan that includes two metrics, the number of hours and the time period you want to sustain each step" of your phased approach.

However, Springer cautions against picking the responsibilities you want to shed. Instead, she says to tell them, "I'd like to transition my responsibilities over the course of the next X period" and leave the task specifics for another conversation.

Springer also says to think through how cutting hours will impact 401(k), ERISA, and health coverage. Below a certain work threshold, you may no longer qualify for health coverage, but could potentially consider COBRA for an 18-month window.

Bottom line

For decades, Americans largely treated retirement like flipping a switch: one day you worked, the next day you didn't.

Increasingly, experts think that the model may not fit modern financial realities or human psychology particularly well.

A phased retirement plan offers a middle ground that can help workers preserve savings and sanity as they ease into retired life. As Americans live longer and work later into life, don't be surprised if "semi-retirement" becomes the new normal rather than the exception.

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