Will We Ever Retire?: The New Staged Retirement

Financial planners have in recent years crafted a new model for what they call staged or gradual retirement. It was initially used by well-off people in their 50s who wanted to leave a demanding job for something more rewarding. But the new model is also being embraced by older workers and often out of financial necessity. Here’s how it works:

–DOWNSIZE YOUR CAREER As you approach the traditional retirement age of 65, you may have paid off the mortgage and finished with child-related expenses including tuition. You will probably have saved much of what you need for financial security. So trade in your demanding full-time job for one that is fun or rewarding, though lower paying.

–LET YOUR SAVINGS GROW You’re now working less and for fulfillment but also to cover monthly living expenses. Say you had been making $80,000 a year in your primary career and had managed to save $500,000. You may be able to cover your expenses now on a salary of $40,000 or less. The key is to leave your savings untouched, if possible in a tax-advantaged investment account, to grow for an additional five to 10 years.

–QUIT FOR GOOD Now that you’re in your 70s and your savings have grown to $701,000 after five years or $984,000 after 10 (at about 7% annually), you can scale back your work schedule or quit altogether and start spending the money you’ve saved over a lifetime.

–By Daniel Kadlec