Most of us can’t wait for retirement, and often our eagerness can overshadow reality just a bit. Many a retiree has made the leap into this next phase of their life, only to realize afterward that they were not truly ready in some way. Perhaps they weren’t as financially prepared as they believed, or they felt disappointed by the lifestyle change. Whatever the reason, it can be difficult to “unretire”.
A Phased Retirement is a terrific option for those who are unsure, and although many of you aren’t aware of it, this option is available to federal employees.
Why would someone choose a Phased Retirement? The reasons can be as unique as your situation, but some common scenarios include:
- The need to provide care for a spouse or parent, and continuing to work full-time would be too taxing
- You’re experiencing a health crisis of your own, and while you don’t want to retire just yet, you need to reduce work hours
- You want to retire but you’re not sure if you’re financially ready, so you decide to ease the transition by retiring gradually
Your situation might be different, but whatever your reason for considering a Phased Retirement, this is how it works: You would reduce your work hours by half, along with your salary. At the same time, you begin drawing part of your Annuity. The annuity payments are calculated as if you are fully retired, but then divided in half. So, your final income is part salary, and part annuity payments.
Then, when you fully retire at some point, your annuity payments will be recalculated. Your years of full-time service and your part-time service (during your Phased Retirement period) will be included in the formula. And of course, now that you’re fully retired you can apply for Social Security benefits (assuming you’ve reached at least age 62) and begin taking withdrawals from your Thrift Savings Plan.
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A Phased Retirement isn’t the right path for everyone, but it can be a great way to test the retirement waters and adjust your lifestyle and budget accordingly. For more information on Phased Retirement for federal employees, give us a call. We can explain the program in detail and help you decide if this might be a beneficial choice for you.
