For Mark Roberts’ Use: In 2014, in response to economic conditions and employee feedback, the federal government launched a Phased Retirement option for their workers. Due to the success and popularity of the program, some private sector companies are following suit. A 2017 study found that about half of large employers are aware of employee interest in a phased retirement program, while approximately one-third (31 percent) are currently offering a similar option.
While formal “phased retirement” programs are still not overly common, many companies allow workers to pursue an approximate experience in one way or another. It is likely this option will continue to grow, along with demand.
How it works.
Those pursuing a phased retirement often report several motivations. First, they desire to reduce their work hours, level of responsibility, or some combination thereof. Second, these workers are interested in retiring within the next few years, potentially, but are worried about the financial transition to a fixed income. They might also feel concerned about the lifestyle change, and wonder whether they will miss the fulfillment of a career.
A phased retirement addresses all of these concerns, but can work in different ways depending upon your company’s offerings. For example, Person A might prefer to reduce their work schedule to three days per week, to avoid stressful commutes. Person B might be fine with the commute and work hours, but prefer to shift into a lower-stress position and shift their attention toward mentoring younger workers. Of course, in both situations either fewer hours or less responsibility might be exchanged for a lower pay grade, which can help anxious employees transition gradually into retirement by “trying on” their new budget.
Is a phased retirement right for you?
Even if your company does not offer a formal phased retirement option, it is often possible to negotiate such a position by matching your own concerns with needs within the company. Employers tend to value the experience and wisdom of their older workers, and are happy to keep them around in some capacity rather than sending them off into a sudden retirement.
If you do decide to pursue this option, we would caution you to carefully investigate your benefit options such as health insurance. Make sure to maintain coverage if you’re under 65 and not yet eligible for Medicare. And, of course, take steps to keep your retirement savings plan on track. Give us a call if you’re considering a phased retirement, and we can help you investigate your options and draft a transition plan for your new lifestyle.
1) Federal News Radio, June 28, 2017
2) Transamerica Center for Retirement Studies, 2017
3) Society for Human Resource Management, 2017