Yes, a phased retirement program is authorized by the Moving Ahead for Progress in the 21st Century Act or MAP-21. In 2014, the United States Office of Personnel Management (OPM) issued final rules relative to the program that provide guidance to agencies and employees about who may elect phased retirement, what benefits are provided, how the retirement pension/annuity is computed during and following phased retirement, and how federal employees may exit the phased retirement program.
Generally, each federal agency has the option of offering a phased retirement program–employees have no right to phased retirement. Otherwise, only employees who have worked full-time for the preceding three years–who meet certain age and years of service combinations for immediate retirement in either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS)–may be eligible. Employees subject to mandatory retirement (law enforcement officers, firefighters, air traffic controllers, etc.) may not participate.
In its broadest sense, a phased retirement is a gradual change in your work patterns as you head into retirement. Specifically, a phased retirement usually refers to an arrangement that allows employees who have reached retirement age to continue working for the same employer with a reduced work schedule or workload.
A phased retirement has advantages for both employees and employers. Employees benefit from the opportunity to continue active employment at a level that allows greater flexibility and time away from work, smoothing the transition from full-time employment to retirement. And employers benefit by retaining the services of experienced workers.
An estate plan is a map that explains how you want your personal and financial affairs to be handled in the event of your incapacity or death. It allows you to control what happens to your property if you die or become incapacitated. An estate plan should be reviewed periodically.
When should you review your estate plan?
Although there’s no hard-and-fast rule about when you should review your estate plan, the following suggestions may be of some help:
- You should review your estate plan immediately after a major life event
- You’ll probably want to do a quick review each year because changes in the economy and in the tax code often occur on a yearly basis
- You’ll want to do a more thorough review every five years
Reviewing your estate plan will alert you to any changes that need to be addressed.
There will be times when you’ll need to make changes to your plan to ensure that it still meets all of your goals. For example, an executor, trustee, or guardian may die or change his or her mind about serving in that capacity, and you’ll need to name someone else.
Financial professionals typically recommend that you review your employer-sponsored retirement savings plan annually and when major life changes occur. If you haven’t revisited your plan yet in 2015, the end of the year may be an ideal time to do so.
Reexamine your risk tolerance
This past year saw moments that would try even the most resilient investor’s resolve. When you hear media reports about stock market volatility, is your immediate reaction to consider selling some of the stock investments in your plan? If that’s the case, you might begin your annual review by reexamining your risk tolerance.
Risk tolerance refers to how well you can ride out fluctuations in the value of your investments while pursuing your long-term goals. An assessment of your risk tolerance considers, among other factors, your investment time horizon, your accumulation goal, and assets you may have outside of your plan account. Your retirement plan’s educational materials likely include tools to help you evaluate your risk tolerance, typically worksheets that ask a series of questions. After answering the questions, you will likely be assigned a risk tolerance ranking from conservative to aggressive. In addition, suggested asset allocations are often provided for consideration.
If you’re a penny pincher but your spouse is penny wise and pound foolish, money arguments may frequently erupt. Couples who have opposite philosophies regarding saving and spending often have trouble finding common ground. Thinking of yourselves as two sides of the same coin may help you appreciate your financial differences.
Heads or tails, saver or spender
If you’re a saver, you love having money in the bank, investing in your future, and saving for a rainy day. You probably hate credit card debt and spend money cautiously. Your spender spouse may seem impulsive, prompting you to think, “Don’t you care about our future?” But you may come across as controlling or miserly to your spouse who thinks, “Just for once, can’t you loosen up? We really need some things!”