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Is progressive retirement right for you?

A man reading a newspaper

Retirement doesn’t have to happen suddenly. Progressive retirement is a slow transition to retirement that can take place over several months or years.

In the past, the switch from full-time work to full retirement took place overnight. One day you worked a full day, and the next day you were no longer employed.

Progressive retirement, however, is a slow transition to retirement that may take place over months or even years. During this transition, you work fewer hours and earn less income, but you are still employed.

Some employers offer formal agreements for progressive retirement. Workers can apply if they meet certain conditions. There are guidelines that must be followed, such as:

  • the length of the transition period
  • the number of work hours during the transition period

Other employers may make special transition arrangements with workers on an individual basis.

Progressive retirement may also be called:

  • Phased retirement
  • Gradual retirement
  • Phased departure
  • Pre-retirement transition leave

According to Statistics Canada, the average age of retirement is 63.6 (61.6 in the public sector). Progressive retirement may begin up to five years before full retirement. If it’s something you’re considering, the time for planning could be just around the corner!

Disadvantages of progressive retirement:

  • Your income will be reduced since you’re working fewer hours.
  • You may no longer have the desire or stamina to keep working. You may prefer to stop immediately instead of gradually.
  • You must continue contributing to QPP (Québec Pension Plan) if you earn over the basic exemption amount. Outside Quebec, the same holds true for CPP (Canada Pension Plan) if you’re between 60 and 65. (These contributions, moreover, will increase your retirement income later.)

Advantages of progressive retirement:

  • Progressive retirement offers security if you’re unsure whether you can afford to retire.
  • A slow transition can give you more time to define and plan your retirement goals.
  • Fewer work hours can allow you to pursue other activities, such as hobbies or caring for a family member.
  • A reduced work load may help if your energy is decreasing.
  • If you are over 60, you can choose to begin collecting QPP or CPP while you’re still working.
  • Some progressive retirement agreements allow you to continue making full contributions to your pension plan during the transition period, even though you’re not working full-time.

Many people find it rewarding to keep working at least a few hours a week. William Harford, president of Municipal Retirees Organization Ontario, wrote in BenefitsCanada magazine that over a quarter of their retired members are working part-time in retirement. Yet it’s not primarily for the money, he noted.

“Almost 55% simply wanted to get out of the house, and 52% wanted to continue using the knowledge they had accumulated over their careers or keep their skills up to date.”

Progressive retirement allows you to challenge your mental faculties, share your expertise and continue making a difference. Is it right for you?