If you're over age 50, retirement is likely becoming a more frequent topic of conversation. One of the most common questions people ask is, "When should I retire?" The answer isn't always straightforward. Like most financial planning decisions, the right retirement timing depends on several personal and financial factors.
Today, many financial professionals and retirees use the term "pretirement" to describe the transition period between full-time employment and full retirement. For years, I've encouraged clients to think about retirement as a process rather than a single event. Breaking retirement into three distinct stages can help make the transition easier to understand and plan.
Step 1: Leaving the "Big Job"
The first stage of retirement is the day you leave your primary career- the job that provided the income, benefits, and savings that helped build your financial foundation.
For many people, this is the position that came with significant responsibilities, long hours, and high levels of stress. Eventually, there comes a point when the desire for more freedom, flexibility, and personal time outweighs the benefits of continuing in that role.
Leaving the "Big Job" often marks the beginning of your retirement journey, but it doesn't necessarily mean you're fully retired.
Step 2: Transitioning Away from Work Completely
For many retirees, the years following a primary career include some form of continued employment. This may be consulting work within your industry, part-time employment, seasonal work, or even a passion project that generates income.
These "bridge jobs" can offer several advantages:
- Additional income that reduces pressure on retirement savings
- Continued social engagement and purpose
- Access to health insurance benefits
- Greater flexibility and work-life balance
In many cases, earning even a modest income during this phase can significantly improve the long-term sustainability of your retirement plan.
Step 3: Beginning to Draw From Retirement Savings
The third stage occurs when you begin relying on your retirement assets to support your lifestyle.
This decision involves careful planning because different retirement income sources have different rules and timing considerations:
- Social Security benefits can begin as early as age 62, but delaying benefits until age 70 can significantly increase your monthly payment.
- Pension benefits often vary based on the age at which payments begin.
- IRA and retirement account withdrawals generally have a greater chance of lasting throughout retirement when withdrawals are delayed and managed strategically.
The timing of this stage can have a lasting impact on your financial security and retirement lifestyle.
Why Each Retirement Timeline Is Different
Every family should evaluate these three retirement milestones independently. In some cases, all three occur simultaneously. More often, they happen years apart.
A well-designed retirement plan helps coordinate these decisions and align them with your goals, income needs, tax situation, healthcare considerations, and desired lifestyle.
Working with an experienced Certified Financial Planner™ professional can help you evaluate the tradeoffs and opportunities associated with each stage.
The Rise of "Pretirement"
Recent research suggests that retirement is increasingly viewed as a gradual transition rather than a sudden stop to working.
A survey of 2,002 Americans ages 35 to 70 conducted by OnePoll on behalf of Human Interest found that the pandemic significantly changed how people think about retirement.
Key findings included:
- 71% said the pandemic changed their target retirement age.
- Nearly one-third reported changing how they save, when they plan to retire, and what they want to do in retirement.
- More than 90% of workers said they are open to changing jobs or industries before retirement.
- 69% believe retirement is a gradual shift away from full-time work rather than a complete cessation of employment.
The concept of pretirement reflects a growing trend: retirement is no longer a single event. Instead, it is a series of decisions that unfold over time.
Retirement Lifestyle Goals Are Changing
The survey also highlighted evolving retirement aspirations.
Many workers indicated they want to remain active and engaged during retirement. Top motivations for pursuing work during pretirement include:
- Extending retirement savings (40%)
- Contributing to their communities (39%)
- Exploring new interests and opportunities
Location flexibility is another growing priority. Only 21% of respondents planned to stay where they currently live. Others anticipated relocating within their state, moving to a new state, becoming more nomadic, or even moving abroad.
These findings reinforce the importance of creating a retirement plan that is flexible enough to adapt as your goals evolve.
Retirement Planning Is About More Than a Date
Too often, people focus solely on identifying a retirement date. In reality, successful retirement planning requires coordinating multiple decisions about work, income, healthcare, taxes, Social Security, and lifestyle goals.
Understanding the three stages of retirement can help you make more informed decisions and create a smoother transition into the next chapter of life.
Schedule a Retirement Planning Conversation
Whether you're considering leaving your primary career, exploring part-time opportunities, or deciding when to begin drawing retirement income, having a personalized plan can make all the difference.
Rich Dunn, CFP®, is a financial planner who helps individuals and families navigate retirement with confidence and clarity.
Ready to build your retirement roadmap? Schedule a conversation with Rich Dunn today and explore your options for each stage of retirement. I’m happy to meet with people who are working on their retirement plans and want a clearer plan for organizing their accounts.
Dunncreek Advisors does not provide legal or tax advice. This article is for informational purposes only and should not be considered legal, tax, or investment advice.
Frequently Asked Questions
When is the best age to retire?
The best retirement age depends on your financial resources, health, career satisfaction, and retirement goals. A comprehensive retirement plan can help determine the timing that best supports your lifestyle and long-term financial security.
What is pretirement?
Pretirement is the transition period between full-time employment and complete retirement. Many people use this stage to work part-time, consult, pursue passion projects, or gradually adjust to retirement while generating income.
Should I delay taking Social Security benefits?
Delaying Social Security benefits can increase your monthly benefit amount, with maximum benefits generally available at age 70. However, the right claiming strategy depends on your overall retirement plan, health, and income needs.