You may have heard of it. But then again if you had you probably wouldn’t be reading this article. So what is pretirement? In this post I’m going to run you through what the concept is (and what it is not) to help you decide if it’s something you should plan for (or something you should plan to avoid).
What is Pretirement?
In recent years there has been growing shift from a ‘hard retirement, one where you go from fully employed to retired in a single moment -taking out a pension and permanently leaving the workforce forever to a soft of ‘soft’ retirement – one where you spend months or even years transitioning between fully employed and fully retired. This transitionary period is called ‘pretirement’.
Now for the question. Is this growing shift towards pretirement a good thing, or a bad thing?
But honestly that’s the wrong question. Pretirement alone is neither good nor bad. Its just a concept. it is a different, more subtle approach to retirement than the standard approach, and whether it is good or bad depends on your goals in life and your reasons for pursuing it.
Why should you do it?
There’s generally two main reasons to opt for pretirement. The first is that you’re in your mid fifties (or perhaps younger), financial independent (or mostly so) and you’re looking to get more out of life than work. You want the freedom to travel, the freedom to relax, the freedom to enjoy life at a slower pace. Your house is probably paid off, your car is paid off, and you’ve got a good chunk of savings stashed away. You don’t need much money at this point in your life, and so while you’re not ready to stop working entirely, given the choice between taking a full salary like you normally do, and buying back a few extra weeks of vacation time, you realize that your time has now become more valuable than the money. So you take the pay cut and you start opting for that extra vacation time.
Or you switch to a part time employment. Or you find a job that allows you to work fewer hours. You may even switch industries (My personal dream is to enjoy my pretirement years as a park ranger working in the national parks)
You still need some money, but not much to maintain your lifestyle as you let your savings mature, or as you wait for social security. In this case pretirement allows you to enjoy the best of both worlds, avoiding drawing down your savings while still enjoying much of the freedom that retirement has to offer.
There’s also a second, increasingly common, and more depressing reason for taking pretirement. In this situation, you’ve reached your retirement years, your full retirement age even, but there’s just not enough money from social security alone to pay your bills. Your Mortgage, your rent, your car payments, its too much to afford, and you don’t savings built up to cover the difference.
In this case, pretirement might be your only option to enjoy some form of retirement. You’re social security is covering most of your bills, but you need to work at least some hours at a job to cover the rest. Unfortunately you’ve either just had to many hardships in life or unexpected difficulties to accumulate that retirement nest egg, or possibly you’ve just done a poor job managing your savings and expense there’s not much left over. Even in this case, pretirement can still give you some of that freedom that you’ve been longing for for so long, that sense of taking things slow and enjoying life on your own terms. If this sounds like you (or sounds like it will soon be you) consider pretirement.
Not For Everyone
Pretirement isn’t for everyone. My spouse’s employer worked until he was 93. Some people get enough satisfaction from working that they don’t ever plan to retire. And that’s okay. Or maybe you’ll be getting a nice pension once you hit your retirement age that along with social security will set you up for life. In that case, there may be little to no reason to ease into retirement.
But if you don’t fit into the former category, the thought a drastic hard retirement scares you, maybe easing into your pretirement is something you should plan for. And If you do plan for pretirement, please don’t plan for the second scenario. Please don’t plan on saving less through your working years thinking you can just keep working through your retirement years and make up the difference. And honestly, maybe you’ll still get forced into that situation through the circumstances of life. And if you do, it’s not the end of the world . After all there’s so much more to life than money, and some people absolutely find pride and enjoyment out of working. But please don’t plan for this. Consider this your ‘plan B’. Make your ‘plan A’ one of paying off your debt, paying off your car, saving up a nest egg, and then letting your retirement savings work for you as you just coast through your pretirement years spending time with your hobbies, your spouse, your grandkids, and what ever else it is you’ve always wanted t make more time for. Plan for an early pretirement so that you can spend those years while you’re still young and healthy enough to enjoy them. (If you need help saving, please check out my why you’re broke article to read up on how you can cut the fat out of your budget https://www.askthesavingsguy.com/2021/09/16/why-youre-broke-hint-its-not-the-avocado-toast/ )