Phased Retirement: The Next Flex Tsunami

three ladies discussing flexible and phased retirement options

The sudden and massive COVID-driven adoption of work from home demonstrated that deeply and irrationally held old employer habits can be replaced with sensible alternatives. Times have changed. People want and need to work longer. Proven talent is growing scarce. And knowledge workers are departing with valuable intellectual property. More flexible, creative approaches – widespread phased and partial retirement – are required.

As older workers approach traditional retirement ages, employers and employees can collaborate on customized schedules that extend individual work lives and yield continuing contribution, knowledge capture and intensive mentoring.

Today's Demand

  • • U.S. Department of Labor: Workers 55-and-older are the fastest growing segment of the workforce
    • “64% of workers age 18-64 envision a phased transition into retirement”
    • Majority of employees age 50+ consider formal phased retirement “‘very” or “‘somewhat” important’
    • 27% of Americans plan to “keep working as long as possible”
    • Another 12% say they don’t plan to retire at all

Today's Supply

• In 2016,11% of companies offered “informal phased retirement”
• In 2016, fewer than 5% of companies offered “formal phased retirement”
• Just 21% of workers say employers enable reduced work hours, any shift from full-time to part-time
• Lower birthrates, reduced immigration, and “The Great Resignation” are choking labor supply

Proven Phased Options Include

Partial Reduction

A schedule reduction from 100 to 80% that lasts 1-2 years is the simplest version of a phased or partial retirement – an easy to manage “respectful exit.” The duration can be set at other percentages and longer periods, such as 70% for 3-4 years.

Phased Reduction

This less common option offers reductions in annual increments such as 100 then 90 then 80 then 70% or a variation. This longer and more flexible reduction process can fit the desire of many older workers to gradually adjust to retirement.

Phased Plus Remote

With the broad adoption of remote work in eligible roles, it has become possible to envision the combination of phased retirement and remote work. This would enable aging workers to combine the benefits of continuing reduced schedules without the necessity of being in the office on a constant basis. In appropriate circumstances it could allow relocation to an eventual retirement destination while continuing regular employment.

Benefits for Everyone

Traditional retirement has outlived its utility. Reinvented and customized to the unique needs of employers and their workforces, flexible and phased retirement can deliver substantial value to its pioneers.

Employers can gain: 

  • Retention of highly valued employees 55+
  • Capture of unique, hard-to-replace knowledge
  • Enhanced mentoring, development efforts
  • Focus of pre-departure employees on high value work
  • Reduced payroll costs
  • Enhanced collaboration skills

Aging Workers can realize:

  • Extended work life and income
  • Enhanced pension contributions
  • Continued engagement, contribution, and satisfaction
  • Role in knowledge transfer, mentoring
  • Healthy means of easing into retirement

Societal benefits can include:

  • Continued contribution to the economy and inclusion in workforce growth
  • Enhanced physical and mental health of those spared sudden termination
  • The restoration of Recession-ravaged savings and reduced risk of poverty
  • Continued employee contributions to Social Security and Medicare taxes
  • A positive impact on pervasive age-based assumptions and discrimination
  • Support for this “care-giving cohort” to privately assist their spouses and elders

The Solution

The term “phased retirement” is used far too loosely to cover employer practices as diverse as one-off deals between a manager and a favored employee and the widely used strategy of “terminate/rehire” older workers as contractors. True phased retirement – what we call “Respectful Exits” – means enabling a modified or reduced schedule as part of retiring from a full-time position. Our design of flexible and phased retirement programs assumes: 

Intentional Design: 

To achieve the goal of retention of valued employees beyond “retirement age,”

  • The options have to be diverse enough to appeal to a range of employee profiles
  • Each phased retiree’s work needs to be systematically re-prioritized to align with reduced schedules
  • A clear plan for knowledge transfer and mentoring has to be well-designed, executed and monitored
  • Individualized Mutual Respect skills training and ongoing coaching is essential for maximization of the employee and manager experience
  • Benefits must be continued with no negative impact on pension terms

Do you want more information on Flexible and Phased Retirement?

Respectful Exits provides employees  with the processes and tools to propose and implement Extended Work and Flexible & Phased Retirement solutions with our web-based tool, ThePhazer™.

Employers can learn more about these options with live and online presentations by our  Respectful Exits Advisory Team. Contact us for more information.