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Lean In to Retirement Tip #1 – Phase In Retirement

What happens when you retire and your money works for you?

Will it be enough for you to retire and live comfortably? Many retirees worry more about outliving their money than they fear death itself. Many have grown up so accustomed to living in the present that they have failed to plan properly for the day they no longer want to work and wish to use their time at their leisure.

Conversely, some of us become so connected to what we do; we identify ourselves by our careers. What happens when that career is over? Will we still have the same level of confidence in ourselves? Will we be bored after living so many years on the go? What’s next?

Let’s not forget about our mental health, either. Studies have shown that our brain is like a muscle. The more we use, the less likely we are to lose. Keeping a career and challenging ourselves is a great way to keep our minds active and live a sharper, longer, more engaged lifestyle.

Among those living an active lifestyle are centenarians, those 100 years of age or older. I often frequent, a website on aging, that shares stories of some working into their 90s because they like what they did. Others enjoyed playing music, dancing or reading magazines like BusinessWeek or Time. Each of their stories had similar outcomes—their positive outlook on life was accredited to living an active lifestyle.

If keeping your mind engaged and your lifestyle active is what gives you a more positive outlook on life, then there is another option than simply calling it quits one day and retiring. What if instead of turning off your career completely, you slowly began to turn the career dimmer switch lower, while the activity dimmer is turned higher? How about a lifestyle where you can enjoy hobbies and activities you always wanted to do but never had time for when you worked full time?

In a book Don’t Retire, Rewire by Jeri Sedlar and Rick Miners, the author states that “retiring is a going from, rewiring is a going to.” You can see why retirement can be stressful and depressing—it actually means to withdraw from something. If you don’t know what direction you’re moving towards, it can be scary to leave something behind. This can be difficult for many people when they are unsure of what they are going to do next.

Instead, replace the word retire with rewire; it could be a lot more exciting to think of doing something new with your increased access to time.

I believe the answer to these uncertainties is to phase in retirement. Try a practice run until you figure out exactly how you want to spend your time and then slowly start phasing in that new lifestyle. This can help solve the two major dilemmas that keep pre- and newly retired people up at night: will you outlive your money and what will you do with all that time?

Your Money.

So let’s talk about the first preoccupation for retirees: money. Will you have enough to last a lifetime? The answer for most people is no, but only if they replicate their spending habits as if they were still working.

When I address this topic for most retirees who simply don’t have the finances to completely retire in their early 60s, I put together a timeline for them. The timeline allows them to see how a phase in to retirement plan would work. When you are retired, it’s the stress of pulling money out of lifetime savings that causes people to run out of money before they run out of life.

If you were to delay pulling money out of your accounts for another 7-10 years, it could have a dramatic impact on the probability of success of not outliving your money. At the same time, you might be able to stop contributing to your savings and retirement accounts when you reach your early 60s if you don’t access those accounts until your late 60s or early 70s. Perhaps you use the money that typically is earmarked for your retirement contributions in your 60s to do the more costly things on your bucket list while you’re still earning a living.

I often suggest considering a gradual pulling back on working hours into your 60s. Take more vacation time, take unpaid leave off, or negotiate at work to scale back your hours. Continue living off your salary, but scale back savings and allow your investments to bake over the next few years without withdrawing from them.

Addressing how to pull back hours at work will be developed in Step 4 of this series. For now, let’s focus more on the impact on your bottom line.

I highly recommended you don’t do this alone but get the approval of your financial advisor before executing this strategy. You still need to understand if it is okay to do this based on a proper retirement income analysis. If you get the green light from your financial counselor, then here’s a sample timeline:

Early 60s.

Start scaling back hours and stop contributing to retirement accounts. Perhaps cut back 15% on work hours —this is the time to really practice what retirement should look like for you. If after doing this and you can’t make ends meet, review your budget and figure out how you can cut spending. It’s better to start doing this before you retire so you have time to adjust and modify your spending patterns before it’s too late. You will most likely need to cut back your budget in retirement. The sooner you do this, the better the outcome.

Mid 60s.

Once you qualify for full Social Security, consider pulling back your hours to 50 – 60% and use your Social Security checks to supplement your income. Once you reach full retirement age, you can take Social Security and still earn as much as you want, without being penalized.

There are many strategies worth exploring on how to maximize social security for married couples that should be explored prior to signing up for the benefit. I encourage you to work with someone on this and incorporate it into your retirement income analysis, as there are some ways to maximize the benefit that you may not have known existed. Remember, you must wait until you reach your full retirement age before taking Social Security if you do not want to be penalized on the benefit.

To determine your full retirement age, view the following chart provided by the Social Security Administration.

Age to Receive Full Social Security Benefits

Late 60s.

Pull back to roughly 25-35% working hours. If you need more funds to help supplement the income, start supplementing a little of those funds with your retirement savings. Michael Kitces owner/creator of the blog Nerd’s Eye View and Jonathan Guyton, CFP® both have done extensive research on what is a “safe retirement withdrawal rate.” For more information you can also check out “Decision Rules and Maximum Initial Withdrawal Rates” by Jonathan Guyton CFP® and William J. Klinger.

Under their guidelines typically you can retire and be reasonably certain you won’t run out of funds in retirement if you live off of about 4-5% of your retirement savings and keep your investments allocated between 65-75% still in equity funds. If you are not completely retired, you might only take out 1-2% of retirement assets to supplement the loss of income from dropping back your hours again.


You call the shots—do you still enjoy your work, or do you want out? If you enjoy work, by all means continue at a moderate pace. But if you’re ready to engage fully in a rewired lifestyle based on your personal interests and hobbies, maybe now’s the time. If you need supplemental income, bump up your withdrawals to the 4-5% safe withdrawal rate and continue living.

Your Time.

Now that we have addressed financial matters, what will you do with your newly acquired personal time? While you’re still working, take the time to begin getting active in your favorite hobbies. Do you enjoy photography, hiking, biking, scrapbooking, cooking, traveling? Consider taking a cooking class, joining a hiking club, take long extended weekend trips.

TechGirl Financial Tip: As you become more active in your hobbies, you may find more ways to make them cost effective. Meet others who share your interests so you can find ways to be social and enjoy activities together. As you get more into activities you enjoy and find others who share your common interest, you will quickly find more ways to be active in those hobbies, which will allow you to fill the longer personal hours as you scale back your work hours. Enjoying your hobbies with others interested in similar hobbies may also allow you to share expenses. Perhaps you share equipment, fees, or travel expenses. This can make your hobbies less expensive as well. I encourage you to get creative and start thinking outside the retirement box so you can start living more.

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