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One way older Americans consider combining work and retirement is to keep their jobs and reduce their hours. This is often referred to as 鈥減hased retirement.鈥� Phased retirement is different from other kinds of job transitions later in life, such as bridge jobs (i.e., those that fall between career employment and complete labor force withdrawal) and re-entry (sometimes referred to as 鈥渦nretirement鈥�). Because phased retirement doesn鈥檛 involve a change in employer, ramping down is much easier. The advantages from an employee鈥檚 point of view are that there鈥檚 no need to interview for a new position and learn the ins and outs of a new environment and culture. The advantage from an employer鈥檚 point of view is that there are likely to be fewer disruptions from an aging workforce.

The gist of the retirement literature is that older workers in the United States may prefer phased retirement to a job change later in life, but the choice is simply not an option because employers are reluctant to offer such arrangements. As a result, researchers have focused largely on barriers to phased retirement from the employers鈥� end. What would discourage employers from accommodating older workers鈥� requests for reduced hours?

At least three reasons have been identified. First, employers might be constrained by legal and regulatory requirements, such as the Employee Retirement Income Security Act (ERISA) of 1974, which sets minimum standards for private-sector pension plans. For example, federal laws may prevent older workers from remaining with their current employers if they want to begin receiving pension benefits. Second, employers might have a financial incentive to let older workers go, because they鈥檙e expensive, both in terms of salary (even adjusting for their higher productivity relative to other workers) and in terms of their fringe benefits, such as vacation and sick-time accruals and health insurance costs. Third, from a practical standpoint, employers might simply find it cumbersome to juggle requests from older workers for part-time schedules, seasonal schedules, and occasional time off.

Human resources specialists have invested a lot of energy trying to removing these barriers. But maybe that鈥檚 the problem. Everyone has been so focused on barriers to phased retirement encountered by employers that no one has stepped back and asked, 鈥淚s phased retirement good for employees?鈥�

The key to this question is the focus on phased retirement 鈥� staying with one鈥檚 current employer 鈥� as opposed to gradual retirement more generally. Older employees who request phased retirement are sending a signal to their employers that they鈥檙e ready to begin the transition to retirement. This is not to say the employees aren鈥檛 dedicated to their employers 鈥� just that they鈥檙e ready to focus on other aspects of life, as well. Many of us would consider that a good thing. The problem is, when push comes to shove and economic conditions necessitate job cuts, part-time jobs are often the first to go, because they are the least disruptive to operations. So, by requesting phased retirement, older workers might have just stepped forward to be聽.

We鈥檙e still in the midst of a post-recession economy that has been more sluggish than most of us have ever experienced. Jobs are returning, but not quickly. While unemployment may be off its highs, it鈥檚 still聽聽and has been for more than three years straight, and counting. Now might not be the best time to express an interest in ramping down.

Bottom line 鈥� for many older workers who want to remain with their current employer, those persistent barriers to phased retirement could be a blessing in disguise.

References:
Cahill, Kevin E., Michael D. Giandrea, and Joseph F. Quinn. 2011. 鈥淩eentering the Labor Force after Retirement.鈥澛�Monthly Labor Review, 134(6), 34-42 (June).

ERISA Advisory Council. Report on Phased Retirement.聽, accessed on June 21, 2012.

Kantarci, T., & Van Soest, A. 2008. 鈥淕radual retirement: Preferences and limitations.鈥澛�De Economist, 156, 113鈥�144.

Quinn, Joseph F., Kevin E. Cahill, and Michael D. Giandrea. 2011. 鈥淓arly Retirement: The Dawn of a New Era?鈥� TIAA-CREF Institute聽Policy Brief听(闯耻濒测).