Washington, D.C. -- One out of three older workers would continue working longer than otherwise planned if their employer offered a phased retirement program. However, many employers have yet to establish formal or informal arrangements -- such as shorter work weeks, flexible hours or the opportunity to try something new -- that would encourage older workers to delay full retirement, according to Watson Wyatt Worldwide.
In a recent survey of 1,000 workers and retirees at or near retirement age, respondants were asked how and why they phase into retirement, how phasing affects the age at which workers fully retire and the implications for employers.
"Worker attitudes about retirement are changing dramatically, and employers have some catching up to do," said Janemarie Mulvey, Assistant Director of Watson Wyatt's Research & Information Center and one of the study's authors.
"We found that a significant gap exists between what older workers are looking for and the opportunities employers provide. For example, a majority of survey participants would like to work fewer hours late in their careers, but less than half of them expect their employer to offer this opportunity."
Why phased retirement?
According to the survey, more than half (57 percent) of current workers in phased retirement entered into the arrangement voluntarily to have more leisure time. When asked their primary reason for choosing phased retirement instead of full retirement, 42 percent of these workers indicated they enjoyed their work, while 28 percent said they needed the income.
Approximately 10 percent of workers currently in a phased status were forced into phased retirement when their career jobs were eliminated. A majority of these workers (58 percent) said they are working in retirement primarily for the income.
"What was once a three-legged stool of individual retirement income is quickly becoming a four-legged stool, with income from wages constituting the fourth leg," says Mulvey.
"But it is important to note that extra income is not always the key motivator for phasers – many work because they enjoy it."
How do workers phase?
When asked how they would like to phase, many older workers said they hope to work part-time (63 percent) or work more flexible hours (48 percent) before retiring completely. Nearly two-thirds (63 percent) of current workers aged 50 and older indicated that they would like to phase in an entirely different career. Among current phasers, 80 percent work flexible hours and 79 percent work part-time. Two-thirds (67 percent) have less responsibility in their current job compared with their career job.
"Although some phasers leave their career employers to pursue an entirely different line of work, many leave to perform similar work with a competitor, but with more job flexibility," said Valerie Paganelli, a senior consultant with Watson Wyatt. "This survey reveals that employers can still do a lot more to preserve the hard-won talent and experience of their career employees."
According to the survey, even an informal phased retirement program can go a long way toward retaining experienced workers. Among workers currently in a phased retirement arrangement with their career employers, 82 percent had been offered the opportunity to work part-time and 71 percent had the opportunity to work a more flexible schedule. On the other hand, among those who left their career employer to phase elsewhere, only 16 percent would have been allowed to work part-time for their career employer and only 20 percent would have been offered a more flexible work schedule.
Delaying full retirement
The opportunity to phase has significant implications for the timing of workers' retirement. Nearly one-fourth of survey participants already in phased retirement programs expect to work past age 65, while another 20 percent do not plan to retire at all. In addition, one out of three older workers said they would continue working longer than otherwise planned if their employer offered a phased retirement program.
"As the economy recovers and baby boomers reach traditional retirement wages, labor shortages will re-emerge as an important issue," says Paganelli.
"Employers would be wise to consider phased retirement strategies that address older workers' needs and that will help maintain an adequate supply of talent and experience in the years to come."