Work/Lifestyle Balance – Do You Have a Phased Retirement Plan?

Are you confident that you have enough savings to retire comfortably? What would you be willing to do to increase your retirement savings? Retire later than originally planned or save more now and potentially make unwanted sacrifices today in order to save more for tomorrow.

It may be a stressful topic to discuss; however, it is important to plan your retirement savings as soon as possible. Therefore, if you have not started a retirement savings plan it would be wise to create one. Those who are currently contributing to a retirement savings plan should assess if they are on the right path.

How can you improve your retirement plan if you do not have enough savings and are limited to contribute more?

Aside from contributing consistently to a retirement plan, another challenge in planning your retirement is that you are assessing your everyday needs at retirement years or even decades in advance. From the time I started contributing to my retirement savings plan (almost 10 years ago), my perception of needs evolved. I believe it is safe to assume that my needs will continue to change. Therefore, I should not be discouraged if my savings plan is not at par with my original plan; however, I should continue to make the set contributions to my retirement savings plan.

When starting a retirement savings plan, what are the main components?

1. Select a desirable age to retire.

2. Age of mortality.

A difficult age to plan but it is encouraged by reputable planners in the industry that a retirement savings plan should provide savings to the age of 90. Science and technology is continuously making breakthroughs in our general health that contributes to expanding our life expectancy. Better to plan on living longer than falling short when it is too late to generate income.

3. Creating a monthly budget (in today’s dollars) for retirement.

4. Calculate the total savings needed for retirement and calculate the monthly/ annual payment needed to save/ invest until retirement.

A solid retirement savings plan gives a person additional options as they get closer to retirement. Usually, the opportunity of increasing contributions to your plan may be limited, due to the allocation of your on going income may be contributing towards other on going monthly financial obligations (i.e. mortgage, life, car payments, family, etc.). Therefore, with so many variables one may consider the possibility of Phased Retirement.

Phased Retirement allows an individual to reduce their working hours as they approach and enter retirement. Both employees and employers benefit from this innovative strategy. The employer gets to retain their experienced workers for additional years, and employees can continue to grow their savings while easing into retirement. With a shortage of skilled workers, due to the baby boomers retiring, as well as the responsibility of retirement savings being shifted from employers/governments to employees over the recent decades; there is a dire need for employers to retain their experienced workers and employees to save more to afford retirement.

How an individual can optimize their retirement savings from a Phased Retirement structure is to work enough to support their current needs for both physical and social survival. Physical needs include food, shelter (most home owners should have their mortgage paid off), and clothing, while social needs are associated with maintaining your lifestyle. While you are working on a part time basis, your retirement savings plan will hopefully continue to grow (at best index to inflation) as you ease in retirement. Ideally your investments will be low risk to accommodate your risk adversity.

The benefits of Phased Retirement include:

1.  Reducing the total amount of retirement savings needed since you may be self sufficient from part time income past your original desired age of retirement.
2. Allowing individuals to gradually retire which could help plan how they will spend their time when they are fully retired.
3. Achieving the opportunity to be gainfully employed during retirement and to stay engaged in professional passion projects, no more grunt work.
4. Empowering individuals, who started saving late, to build wealth while avoid having to sell or borrow the equity from their home.

It is never too late to start planning tomorrow today. As well, there are always options to plan your future without having to make major sacrifices today.

Rafael loves to travel and devotes his time working with individuals making the leap from employee to employer. As CEO of Reis Financial Solutions Inc, he provides management accounting services for small to medium sized businesses, balancing wealth strategies that are favorable for both the business owners and the business itself.

Tags: Phased Retirement Plan

Category: Investing & Earning