Phased Retirement

Phased retirement programs allow older workers to develop flexible work schedules rather than retiring completely. Employers are increasingly offering phased retirement in order to retain their older workers.

In fact, at a time when older workers are a greater and greater proportion of the workforce, a phased retirement program can be the difference between retaining the mission-critical knowledge of your older workers, and losing your most experienced workers to full retirement.

Proven Results

Papers & Studies Phased Retirement: From Promise to Practice Phased Retirement: Who Opts for It and Toward What End? Legal and Institutional Impediments to Partial Retirement and Part-Time Work by Older Workers Structural Impediments to Phased Retirement Developments in Phased Retirement

Studies have shown that older workers who are given the option of phased retirement tend to stay at their job longer by postponing full retirement. A 2004 analysis by Watson Wyatt found that that phased retirement programs extend women's retirement age by 21 months. This was reaffirmed by a separate AARP study in 2006, which found that, "Phased retirement is associated with a lower risk of full retirement, and the effect is statistically significant...the estimated risk of full retirement for a phased retiree is 75 percent of those not in phased retirement."

On the other hand, the absence of a phased retirement program can lead your experienced workers to seek employment at firms that provide more work flexibility. A Watson Wyatt survey found that, "in many cases, workers left their career employers in search of phased retirement opportunities."

The Importance of Flexibility

Phased retirement is effective because job flexibility is a high priority for older workers. A paper by Michael Hurd and Kathleen McGarry found that job flexibility was a more important factor in whether an employee desired to keep working past retirement age than the physical and mental requirements of the work.

A RAND Corporation report also emphasized the importance of job flexibility, suggesting that it may be even more important than salary level. The report observed that older workers seek jobs "that they enjoy and allow them the flexibility they desire at the expense of low financial returns. This is consistent with statements commonly made by older workers in the press that they work because they enjoy work and it contributes to their physical and mental well-being."

This preference for flexible work arrangements is reflected in polling data. A Cornell University study of older workers found that while 19% desired to be fully retired, almost twice as many (35%) preferred some form of partial retirement.

The Cream of the Crop

Employers who offer phased retirement report that it attracts their most capable, satisfied, and motivated employees. Studies have found that:

• "[Phased retirees] are more likely to have a positive view of work (that is, to express both a belief that work is by itself important, not solely as a means for acquiring money, and a desire to keep working even if income is not needed)"
• "The proportion of individuals who report really enjoying going to work increases ... from 0.86 at ages 50-54 to 0.96 at ages 75-79"
• "Phased retirees are more likely to be managers and in white-collar, highly skilled positions"
• "The labor supply of the elderly is concentrated among the healthiest, wealthiest, and most educated individuals"
• "Older workers (64%) feel more loyal to their employers than Gen X workers (47%)"

Develop a Plan

Before instituting phased retirement policies, take the time to plan a sustainable program that targets your most essential human resource needs:

• Carry out human capital planning to identify
  • which parts of your organization are most likely to lose employees to retirement
  • which skills will be hardest to recruit in the future
  • what knowledge is critical to your organization and who has that knowledge
• Involve both your Human Resources staff and managers from other departments when planning a phased retirement program. Department managers can provide important information on which workers need to be retained, what their older workers are seeking, etc.
• Work with human resource experts to ensure that phased retirement policies are legal and non-discriminatory.