Downshifting in Retirement

Downshifting Can Help Bridge the Income Gap

When we go from a full time salary to just relying on our pensions and savings, we may not be prepared enough to sustain the lifestyle we want. This does usually require decades of proper preparation, saving up a large enough portion of the income that we earn over our careers to sustain us in the final decades of our lives.

This used to be easier to do when people didn’t live as long, when people typically worked to 65 and didn’t live all that much longer on average. Life expectancy has increased quite a bit over the last 100 years, and 100 years ago most people didn’t even reach the age of 65, where now we’ve increased this where when we reach 65 we may expect to live 20 more years, or longer.

As life expectancy increases, this doesn’t generally mean that we’re able to work longer, from a physical standpoint anyway, as people still fall prey to the effects of old age. We may be motivated to do so by economic considerations though, we nowadays we’re having to compile a larger sum of money to get us through the retirement years, since there are more years to have to manage.

Retirement from one’s career and retirement in general used to go hand in hand for the most part, but today we’re seeing that they often don’t, as people are seeing this transition as not necessarily turning the engine off, but instead downshifting to a less demanding schedule, but one that still allows them to earn.

The shorter the time we have to prepare and accommodate, and the more we need to retire on, the more challenging this becomes to pull off properly, and people tend to take this more and more seriously as they get older. It’s hard to make up for lost years though when we may not have taken retirement seriously enough, in what is known as the accumulation phase of our lives, where we actually tend to spend more than we perhaps should if we’re looking at the big picture.

We therefore tend to appreciate the need to save enough in the latter half of our careers more than in the first half, and while we tend to make more money in the second half, the demands of making up for shortfalls from not saving enough early enough can be a big challenge indeed.

Many people discover that they are not going to be able to reach the goals they once set for themselves, like completely retiring at 65 for instance and being able to maintain the lifestyle they wish, while the prospects of looking to manage for 20 or 30 more years awaits them on the horizon.

Co-Ordinating Downshifting with Pension Income

If we are considering downshifting, reducing our working schedule from full time to part time, doing so at a time where we start receiving pension money can make a lot of sense. The pension income will of course serve to offset at least some of the reduction in income, and we may be able to maintain our current level of income while working less.

Sure, we may want to continue to work full time and collect the pension as well, and that’s fine, but should one want to cut back on their workload, this may be a good time to do it. There will come a time in just about everyone’s lives where they will want to cut back, to either semi retire or retire completely, and therefore the choice here in downshifting is whether you wish to rely completely on your pension and savings or delay doing so to some extent.

The net effect of downshifting at this point, or at any point actually, is to extend the life of our savings, where we’re not drawing down on them so much or even at all during this transition phase. Not spending and saving are essentially the same thing, and downshifting allows us to save in this manner.

This is the case even when we are depleting our savings during this time, as if we are depleting them at a lesser rate, we’ll have more savings at any given point in the future. This makes us less likely to outlive our savings, and also be better able to meet unforeseen expenses in the future as they occur.

Retirement for Those Who May Not See It as That Realistic

If we can manage to match the reduction in income with the increased income from pensions, we may not even need to draw down our savings during this period. The reduced workload in downshifting may mean that we may be able to sustain it for a considerably longer period than working full time.

In the latter stages of our careers, we have accumulated a lot of knowledge but may not have the physical capacity to keep up as easily. Cutting back our hours can allow us to continue to contribute meaningfully but in a way that is more sustainable and manageable.

A lot of people these days view the prospects of retirement with a lot of anxiety, believing that they either will have to postpone retirement well beyond what they had earlier hoped, or even not be able to retire at all.

People need to retire sooner or later though, so saying you never will be able to retire just isn’t realistic, but when we say that we usually mean completely retiring, stopping work and stopping earning altogether.

Reducing one’s workload when one is ready to do so though becomes a more realistic option, and this doesn’t necessarily mean taking on menial part time jobs either, although in some cases people do that. The structure of our workforce really isn’t set up that well in order to accommodate downshifting, but this may and probably will change in the coming years.

Toward More Flexible Work Environments

Human resource management strives for simplicity to a large degree, and this has resulted in the fairly rigid structure that we still see as far as the time required to devote to employment goes.

There are some benefits to this, as it does cost a certain amount of money to employ someone, and the greater their workload, the more efficient these costs become.

It would be too expensive for instance to add a lot more people to an organization’s workforce, and aside from costs there are a number of other reasons why this would not be a good idea if extended too much.

Somewhere in between requiring a standardized schedule and work week with no flexibility and having a completely flexible and customizable one lies the ideal. We have perhaps allowed our thinking here to be too inflexible, and this is especially the case when it comes to managing our older workers, often preferring to lose them rather than accommodate them better.

When faced with such a choice, which often happens with an older worker, this is a point where we should indeed strive to become more flexible and offer them a schedule that better suits their needs and allows them to stay on longer or even much longer.

We see talented people go out the door who still possess a lot of expertise and go on to part time consulting roles, now using what they have learned to help out other organizations. When we set full time hours as conditions of employment, this is what can happen, but there is often no good reason why we can’t retain a lot of these people in reduced roles, reduced in terms of quantity of work but still taking advantage of the higher quality of work they may be able to still provide.

Many people have taken it upon themselves to downshift by seeking out new and less demanding positions, and as we become more aware of the benefits of allowing these workers more flexibility within their current organizations, this transition can certainly be made much easier and also allow for people to perform at higher levels.

Old habits tend to die hard though and we’re a long ways away from seeing this become the norm. In any case, transitioning from full time to part time to retirement has become a lot more popular, mostly by necessity, although this does lead us to a more ideal way of transitioning our people out of the workforce in a way that benefits both them and us.