01 Dec. 2014 | Comments (0) Share Follow @Conferenceboard
More boomers are moving into the traditional retirement age range. Many of them lack traditional pensions or adequate assets for a secure retirement. For financial and other reasons, many are continuing to work to older ages. When asked, Americans nearing retirement say they expect or want to continue working during retirement. More likely would work if their employment options were more appealing.
Time spent in retirement has increased markedly as life spans have increased without corresponding increases in retirement ages. The Expert Commission on the Future of the Quebec Retirement System has observed, for example, that in 1970, expected work life was 46 years, and the expected retirement period was 13 years. By 2009, expected work life in Quebec had fallen to 38 years and expected retirement was up to 23 years.1 The ratio of years of retirement to years of work increased from 28% in 1970 to 61% in 2009. The balance of years retired to years worked has also increased a great deal in the United States.
While some businesses have no trouble finding the talent they need, others face labor and talent shortages. These employers are concerned about keeping talent. One way that some employers have responded is to offer their older workers alternatives to full-time employment, including the option of easing into retirement by cutting work hours. The U.S. Office of Personnel Management recently finalized regulations for the Federal phased retirement program, which will allow federal employees to work reduced hours as they phase into retirement. This program may encourage private businesses to at least think about their policies with regard to work options and phased retirement. At this time, many U.S. organizations have part-time work options and some allow phased retirement on an ad hoc basis, but few formal phased retirement programs exist.
There is no clear definition of phased retirement. From an individual perspective, phased retirement can be seen as the journey from full-time employment to total exit from the labor force. It can include reduced hours at the same job or a different job, part-time and temporary work during a period of transition. It may include the possibility of collecting partial pensions while working and/or the possibility of continuing employee benefits while on a reduced schedule. I define phased retirement from the individual perspective and include a broader range of work options, including those at a career employer and those at a new employer. From the employer perspective, phased retirement is more likely viewed a change in duties or schedule of a long time employee before final exit from the organization. It might include a regular arrangement or sporadic work. Phasing may include a reduce schedule before retiring or sporadic work after retirement and collection of a pension.
Many people have not been retiring when they planned to retire. For many years, about four of ten people have been retiring earlier than planned, often due to job loss, ill health, and family care responsibilities. 2013 research from the Society of Actuaries showed that pre-retirees surveyed expected to retiree at a median age of 65, but retirees had actually retired from their primary job at a median age of 58. The research also indicated that many of the people who retired voluntarily did so because of work related pressures, family needs, or health problems. Many of these people would have liked continued work, but often on a basis that fits their redefined priorities.2 The current situation is not serving the needs of business, employees or the total economy well. Whenever people exit the labor force earlier they wish, there is a cost to the economy, which will only grow as more of the Boomers are in this group. Action is needed to create new options.
For your reference, I provided the following resources below that provide further information on this topic:
1) The Conference Board report, “Phased Retirement after the Pension Protection Act,” provides background on the topic of phased retirement.
2) For a different perspective, I authored an article on phased retirement from the perspective of the retiree, published in the January 2013 Society of Actuaries Pension Section News.
3) There is also an interview for the New York Life Center for Retirement Income at the American College on phased retirement. The interview is a video lasting about 15 minutes. It has been used in graduate financial planning classes.
4) The Society of Actuaries 2013 Risks and Process of Retirement survey provides insights into when and why people retire. It demonstrates a difference between what people expect and what happens later. In the 2013 Society of Actuaries Survey of the Risk and Process of Retirement, 41% of pre-retirees said that they expected to retire all at once, and 78% of retirees said that they had retired all at once. The 2011 survey focused on issues surrounding working in retirement, and a special report was produced on that topic.
Please revist The Human Capital Exchange next week as I post a second blog on how to use phased retirement and alternative work options to match business and employee priorities.
 Expert Commission on the Future of the Quebec Retirement System 2013. (Note that the eight-year drop in expected work life was the result of an increase in expected age of entry to the labor force from 19 to 22, and a drop in the expected retirement age from 65 to 60. The 10-year increase in expected retirement was the result of a five-year decrease in expected retirement age and a five-year increase in life expectancy.)
 Society of Actuaries, 2013 Risks and Process of Retirement Survey, Report on Personal Risk Management, 2014.