Financial Planning Opportunities to Consider When Entering Phased Retirement 

Phased retirement allows eligible university employees to gradually reduce their workload and responsibilities before fully retiring. This transition provides an opportunity to mentor and support students and colleagues, while thoughtfully closing an important chapter of their careers and easing into retirement. Beyond improving work–life balance, a phased retirement can also reveal financial planning opportunities in the years leading up to full retirement. 

Here are several financial planning considerations as you start a phased retirement: 

Tax Planning 

Phased retirement often reduces wages, which can create a unique tax situation. Lower taxable income in the years before full retirement can uncover planning opportunities such as Roth conversions, voluntary pre‑tax distributions, or realizing capital gains. By taking advantage of potentially lower tax brackets during a phased retirement, individuals may be able to reduce future required minimum distributions (RMDs) and build Roth assets at lower tax rates, depending on individual circumstances. 

Individuals who enter phased retirement after reaching their RMD age, which is age 73 for those born between 1951 and 1959, may, in limited circumstances, be able to defer RMDs from pre‑tax retirement plans sponsored by their current university employer, subject to plan rules and IRS requirements. This deferral allows them to postpone taxes that would otherwise apply to RMD amounts until employment ends. 

Medicare Planning 

Entering phased retirement can delay the requirement to enroll in Medicare Part B beyond the standard age of 65 in certain circumstances if you remained covered under the university’s group health plan. 

Lower income can also help reduce Medicare Part B premiums once you fully retire. Medicare premiums are based on Modified Adjusted Gross Income, or MAGI, from two years prior. For example, 2026 premiums are based on 2024 MAGI. By maintaining a lower MAGI in the years leading up to full retirement and Medicare Part B enrollment, individuals can help reduce the premiums they pay during the early years of retirement. 

Investment Planning 

As retirement approaches and the need for income from investment assets increases, phased retirement provides an ideal time to reassess portfolio risk tolerance and long-term goals. As income needs become more immediate, some individuals choose to shift from a more equity-heavy allocation to a strategy that prioritizes stability and shorter-term liquidity. 

University professionals in phased retirement should also revisit the tax treatment of their investment assets. Thoughtful asset location planning plays a critical role in managing future required minimum distributions, deferring taxes on interest income, and maximizing the long-term tax-free benefits of Roth assets. 

Looking Ahead to a Retirement with Purpose 

For university professionals, phased retirement offers a meaningful opportunity to shape the final chapter of their careers with intention, balance, and purpose. It allows them to continue contributing through mentorship and service while thoughtfully preparing for life after fulltime work. From tax and Medicare considerations to investment and income planning, this transition period creates valuable space to help align financial decisions with personal goals. While phased retirement may mark the conclusion of a professional career, it also serves as the foundation for a well-planned retirement. 

Savant University Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois, serving clients in academia nationally. Our advisers have specific and in-depth knowledge about university employee benefit programs and retirement plans. We work with university faculty, physicians, and other professionals. We are not associated with any university, or any retirement vendor and we have no access to your private retirement or personnel information. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.savantwealth.com. 

Presented By:

Aaron Y. Dykxhoorn Financial Advisor CFP®, MS

Aaron has been involved in the financial services industry since 2022. He earned a bachelor of science degree in biology from the University of Miami and a master of science (MS) degree in finance from the University of Miami’s Herbert Business School.