When someone you love dies, one common piece of advice is to not make any major decision within six months. Your brain may be clouded by grief and sadness, so it can be difficult to be rational. This can include decisions about giving up your job.
Not everyone follows this advice, though, and there are times when a death may spur you to take an action you should have taken anyway but may have been frightened about. The death drives home the point that life is short, so you shouldn’t wait.
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The big question in this case, then, is how to decide if the choice you’re making actually makes sense.
Let’s pretend, for example, that Carl’s brother Tim just died. Carl is 57, and he’s hated his job for a long time, but now that Tim has died, he’s decided he’s done. Carl doesn’t want to waste another minute, as Tim’s death reminds him how fragile and fleeting life can be.
Unfortunately, Carl can’t afford to quit entirely. So, he’s wondering if a “soft” retirement is the solution.
What is a soft retirement?
Once upon a time in America, retiring from a decades-long job with a gold watch and a pension plan seemed within reach.
Today, however, many older workers aren’t planning to hit 65 and quit cold turkey to enjoy a life of leisure. Instead, either out of necessity or desire, nearly half of Americans now expect to transition into retirement gradually. This typically means tapering down working hours but continuing to work in some capacity into old age.
“Retirement doesn’t have to mean quitting work entirely,” Mary Ware, senior wealth advisor and managing partner of Carnegie Private Wealth, told Moneywise. “Even a modest amount of additional income in retirement can have a big impact on the longevity of your nest egg.”
Carl, for example, might decide to give up his time-consuming, stressful full-time job and find something more flexible, even if that means taking a big pay cut.
So, would a soft retirement work for Carl? A lot depends on his finances and long-term goals.
“You must know how much income you need to earn to support your expenses in today’s dollars and with a minimum assumption of 2.5% inflation in future years,” Ware said. “It’s critical to have a plan that tests your ability to meet not only the basic needs but the goals that you have for retirement, such as travel. Your plan should also test your ability to fund long-term care needs.”
Ware warned that because Medicare doesn’t start until age 65, Carl could end up forced to cover health insurance premiums if he quits his full-time job and takes on a series of side gigs or contract work that don’t offer coverage. This could affect the income he needs and should be taken into account.
Domenick D’Andrea, founder of DanDarah Wealth Management, also warned of the broader financial implications of stopping work at such a young age, especially if Carl was making good money. “To start, Social Security works off your highest 35 earning years, so by lowering your earnings you could also be lowering your Social Security payout,” D’Andrea told Moneywise.
D’Andrea also pointed out that Carl may not be able to access some of his retirement savings until age 59.5 unless he follows the 72(t) rule (aka the substantially equal periodic payment rule) that allows him to make withdrawals from retirement accounts on a set schedule without penalty.
“You need to not just look at how this will affect you now but also in your future,” D’Andrea warned.
“Crunch all the numbers and make sure you’ll still be able to fully retire when you want to,” he said. “If you can handle all the potential downsides of this decision without negatively impacting your overall full retirement, then this may be right for you. If the numbers don’t look good, then I would seriously consider not doing it.”
How can you find opportunities that allow you to ease into retirement?
If Carl has run the numbers and he believes he can make it work, then he’ll also need to make sure he can find jobs that offer the chance to ease into retirement.
Anne Ryan, a career coach who regularly works with older job seekers, suggested that Carl “develop a roadmap to transition to soft retirement that looks at things from different perspectives: financially, insurance-wise, professionally, and logistically.”
To do this, she suggested considering:
What your compensation could look like during a soft retirement
Whether you’ll have any employer-provided health insurance
Whether you prioritize more money or a low-stress environment
Whether you’ll rely on your personal savings or a retirement account to cover gaps
Whether you’re interested in part-time work at your current job or are thinking about freelancing or starting a company.
Whether you want to do similar work to your current job or want something different
“Once you’ve thought through these questions, then it’s time to develop a plan to move into soft retirement,” Ryan said.
Carl can hopefully rely on his existing network to find the right part-time or low-stress opportunities to build the kind of life he wants now that his brother is gone.
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