If you’re considering reducing your working hours, you will need some information to assess how this may impact your salary. This can be obtained from your HR Operations Administrator.
The promises connected to measures and strategies of flexibilization can be realized only when they are actuarially neutral or fair. This requires consideration of four analytical dimensions: aggregate versus individual flexibility, the temporal dimension (about pension age), accessibility and eligibility criteria, and financial costs and risks.
Flexibility
If you’re considering a flexible retirement, a few options are available. For example, you could take a lump sum from your pension pot and invest the rest. This means you can continue to work while receiving an income from your invested pot. Alternatively, you could draw an amount from your pot every month. This option is known as a flexi-access drawdown.
It’s important to note that flexible retirement planning isn’t for everyone. It’s essential to consider the impact of flexible retirement on your financial situation and lifestyle. It’s also a good idea to seek advice from a professional before making any decisions. However, whether these measures and strategies achieve their intended aims in the context of pension reform is questionable.
In particular, who bears the related (potential) financial costs and risks often needs to be clarified and who reaps the associated advantages. This is the case, for instance, in the form of subsidized wage top-ups and other schemes that allow older workers to stay on an institutional early or partial retirement path before reaching pension age – or even beyond.
A Better Work-Life Balance
When people are stressed or overworked, it can negatively impact performance and productivity. Having the freedom to work flexibly allows you to focus on the other essential areas of your life and find the right balance. Taking a break when needed helps improve mental health and well-being while providing the time to pursue other interests or spend time with family.
A flexible retirement planning approach can help you manage your finances by reviewing your incomings and outgoings. This will help you determine your ideal lifestyle, how much money you need to reach that goal, and establish a budget. This will help you to stay within your means and avoid a cliff edge when you retire.
The idea behind implementing gradual retirement transitions is that they are meant to help reconcile competing goals of pension reform, including saving money and allowing workers to retire on their terms.
However, it still needs to be determined whether these policies are effective at achieving these goals, and their individual and structural consequences should be studied further, considering the conditions and forms of flexibilization, kinds of outcomes, and social groups affected.
More Control Over Your Money
Many dream of owning their own home, traveling the world, or pursuing hobbies, but these ambitions become easier to achieve with the right financial foundations. Money management tools and budgeting techniques can help you plan and save for future goals.
It iis a good idea to open a fee-free savings account, separate from your main bank account, for this purpose. You can also set up a standing order to automatically transfer a specified amount into this account regularly.
Saving in a tax-advantaged way can mean you keep more of your hard-earned income. For instance, you can get an up-front tax deduction when you save in a retirement account like a 401(k) or 403(b) or through a traditional or Roth individual retirement account (IRA).
Building an emergency fund for unexpected expenses such as car repairs and medical emergencies is also wise. This can prevent you from needing to use credit cards or loans, which can cause debt problems later on. You should aim to have about three months’ worth of living expenses saved up, although self-employed individuals may want to save more.
Flexibility in Retirement Planning
Despite the potential benefits of flexible retirement, knowing that it will not suit everyone and will come with financial costs is essential. It is, therefore, vital to seek financial advice from a qualified professional to help you evaluate and understand what this option means for you.
The fourth dimension concerns the resulting impact on well-being outcomes. It refers to whether a flexible transition to retirement is likely to lead to unfavorable (or even negative) well-being outcomes if it entails a dramatic drop in income, for example, by reducing hours and taking on a part-time job that pays less than the one worked before retirement.
This is a concern in particular if the financial implications of the measure or strategy need to be better explained, for example, by its actuarial neutrality or fairness. This is because such a move could be counterproductive regarding your pension savings, as you may run out of money sooner than you expect and might thus need to return to work later. This risk must be considered before taking up the offer of flexible retirement.
