Several decades ago, “working” and “retirement” were binary terms, with little overlap. People were either working (and under the age of 65) or had hit the age of 65 and were retired. That’s no longer true, however, as phased retirement is becoming more popular and more common.
Phased retirement allows employees to work part-time after retirement or gradually transition to new positions.
What’s phased retirement? It refers to retiring as a process, rather than a one-time event. Some workers have a pre-retirement phase, where they may reduce their working hours or take on responsibilities training the people who will eventually replace them. Some take retirement and begin drawing retirement benefits, but also continue to work part-time. In these cases, too, they can either work at past positions, transition into areas that need more coverage, or train and consult. Finally, a growing number of workers retire completely and then decide to come back to the workforce after having been out of it for a while, a process known as unretirement.
Some companies used phased retirement to train and mentor new people.
Flexibility and Leadership Development for Companies
The motivations for phased retirement vary among organizations and employees. Some positions, such as nursing, are suffering from critical staffing shortages, and business leadership thus actively recruits the retired and soon-to-be-retired among their ranks to ease staffing shortages and high turnover rates. Bon Secours Virginia Health System, for example, has an active program of “rewiring rather than retiring” employees who still want to work, re-envisioning how their skills may be used. Nurses who used to work in surgery, for example, sometimes transition to discharging patients after surgery, which is less physically demanding.
Other companies are experiencing difficulty hiring in the low unemployment market and are simply willing to accommodate flexible schedules in return for an influx of workers. Others are using phased retirement as a method of leadership development. NASA, for example, creates positions for valued employees who will then train and mentor the next generation.
Flexibility, Community, and Income for Employees
Several trends are driving the popularity of phased retirement among employees. First, a number of trends, including the decline of pensions, increasing longevity, and a rising cost of living have made many people facing retirement worried that their retirement savings are not sufficient. MetLife’s 17th Annual US Employee Benefit Trends Study indicated that 52 percent expected to retire later for financial reasons, an increase from the 32 percent registered just four years ago.
Many who unretire also find that they like the community a regular job provides and the flexibility to work part-time.
These benefits are leading a growing number of companies to offer phased retirement to their employees. Thirteen percent now offer informal programs, a rise of seven percentage points in four years. Six percent of companies offer formal programs.
Programs differ. Some require a certain number of hours as a working minimum. Others will only allow phased retirement for a certain number of years. Others are more flexible and can exist indefinitely.
Companies that participate in a formal program need to coordinate their benefits, including healthcare and retirement benefits. Companies that continue to offer healthcare benefits to older workers, for instance, may see their costs rise steeply. They also need to consider employee options to join Medicare.
Phased retirement is a valuation option for both companies and employees and is likely to increase going forward.