Published on September 28, 2023

Why You Should Consider Flexible Retirement Planning

A flexible retirement plan allows you to reduce your working hours and top them up with an income from your pension. However, this is a big decision; you should seek financial advice before changing. The central promise associated with flexibilization in the retirement transition is that reducing working hours saves financial costs. This assumption needs to be carefully scrutinized.

You’ll Have More Time to Spend with Your Family

Retirement is an exciting time for many people, but it’s also when they might find their financial obligations more complicated. Having flexible retirement planning can help make this transition easier and may even allow you to spend more time with your family. In this context, institutional regulation about flexibility retirement transitions offers a defined frame and rules for when, how, and for whom such a reduction of working hours is possible. In addition, purely individual “DIY flexibilization” strategies are also possible. However, these mainly individual strategies of flexible retirement have their limitations. For example, reducing your working hours means less money, which can lead to reduced income through a lower pension. Additionally, a less pronounced working life can make it more difficult to cover living expenses for unforeseen events or long-term health problems. Therefore, anyone who wants to take advantage of this opportunity for flexibility in their career should carefully assess the implications for their financial situation.

You’ll Have More Money

The main advantage of flexible retirement planning is that you can have more money to spend in your later years. By reducing your working hours, you can continue contributing to your pension fund and still top it up with income from other sources, such as part-time work or self-employment.

You can also use your pension savings to buy a regular income that will last for as long as you do, a process known as ‘pension drawdown’ or flexi-access drawdown. This option lets you receive some or all of your pension pot as a lump sum, but the rest remains invested, meaning it has the potential to grow in value.

However, it is important to note that implementing flexibility in the transition to retirement often implies an enforced redistribution from those with low to those with high life expectancy and may entail rising inequalities if not adequately regulated (see also Contested Issues Around Gradual Transitions to Retirement). Any benefits you enjoy from flexibility depend on how carefully it is implemented, which may only sometimes be possible.

You’ll Have More Time to Travel

Leaving the workforce for good can be daunting, but reducing your hours and getting a regular income from your pension savings could make retirement easier. If you decide to do this, seeking financial advice is vital to assess whether your plan will likely succeed. The value of your investments can go up and down, so you’ll need to ensure that you won’t run out of money before you die.

The concrete design of flexible retirement transitions, in terms of accessibility and eligibility and financial costs and risks, determines who can realize the advantages of these options. In this respect, the individual “DIY flexibilization” strategies may be a useful benchmark for understanding institutional regulation related to flexibility in retirement transitions. This is particularly true in coordination market economies, where schemes like subsidized wage top-ups are often only accessible to longer-term core employees. This is because of employers’ role in these arrangements, especially collectively organized employer groups.

You’ll Have More Time to Learn New Skills

While this may seem obvious, it is important to keep learning new skills to stay relevant in the job market. Having flexible retirement planning can give you the flexibility to do just that. If you want to retire gradually, it is possible to do so by working less and reducing your hours. This can give you the time to focus on learning new skills or to take a course that will help you further develop your career.

However, such a reduction will lead to a lower income, which may have to be made up with subsidized wage top-ups or pension contributions. Such a path of flexible retirement may only be feasible for some individuals.

This is why reviewing financial incomings, outgoings, and overall living costs is essential before considering a flexible retirement plan. This will give you a good idea of whether or not this is something you could afford. In addition, a detailed analysis of your pension savings will also help to clarify whether or not this is a realistic option for you.

You’ll Have More Time to Volunteer

Retirees often choose to continue their professional involvement in some way, whether it’s keeping current with industry trends or pursuing something completely different. Flexible retirement planning can give you more time to explore these options and decide what interests you most.

Volunteering also gives retirees a sense of purpose and fulfillment in their lives. Whether giving back to the community or simply helping others, volunteering can keep your brain sharp and help you develop new relationships in retirement.

If you can continue working in some capacity after retiring, it’s a great way to supplement your pension or other income sources and continue to sock away money for a vacation or whatever else might be on your bucket list. It’s important to note that this type of work can add a lot to your stress levels, so carefully consider your options before deciding. 

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