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Phased retirement programs are on the rise. These programs allow older workers to cut back on hours gradually while still retaining some pay and benefits. (The Wall Street Journal) |
NH: Not ready to go from full-time work to full-fledged retirement? You’re in luck. The popularity of phased retirement programs, which allow workers to cut back on hours and responsibilities while retaining some pay and benefits, has soared during the pandemic.
According to a survey of 1,736 global HR executives from consulting firm Mercer LLC, 38% of them now offer phased retirement, more than double the 17% that did so pre-pandemic. Another poll from the Society for Human Resources Management found that in the U.S., 23% of employers had phased-retirement programs in 2021, up from 16% in 2016.
Companies tout these programs as a way to manage brain drain as Boomers retire en masse. Those who participate often use their freed-up time to train a successor. And participants like them because they provide a gentle “off-ramp” to retirement, complete with benefits.
IMO, this is a nice perk for those who can exercise it. Better than the bad old days when, at age 55 or 60, you were expected to train your replacement--and you had no option of staying longer even if you wanted to do so.
Yet overall my reaction is decidedly mixed. We have yet to know all the details of these newly launched programs. If they follow in the path of most other recently designed phased-retirement programs, however, there is one thing we do know: As a rule, these programs have been available only to highly paid professionals and highly educated technical workers--most of whom already enjoy ample opportunities to work into their late 60s or 70s if they so choose.
In fact, the welcome rise in LFP rates among seniors over the last two or three decades has occurred mostly in precisely these types of workers. And not just in America, but in most high-income economies. (See "Retirement-Age Workers Giving the World a Boost.")
But what about the lower-income Boomers (and very soon, Xers) who are approaching 65 with the highest rates of disability and chronic disease and most risk of falling into poverty without current wage income? For them, such graduated programs are not generally available.
For as long as they can, these workers continue to work full-time at low-wage jobs. (See "Boomers Stuck in 'Low-Quality' Jobs," "Why Are Seniors Flipping Burgers?" and "McDonald's Teams with AARP.") Yet overall these workers are not retiring later. If anything, they are retiring earlier, often on DI benefits in order to quality for Medicare before age 65.
One symptom of this growing tilt of senior workers toward the higher-earning professionals is the remarkably buoyant trend in average earnings among all senior workers. While the real earnings CAGR from 2007 to 2017 was less than +1.0% for workers of all ages, among workers in their late 60s it was +2.1%, and in their 70s it was +3.5%. Not only was this growth rate much faster than that of younger workers, it was also much faster than that of seniors themselves in the previous (1997-2007) decade.
What explains these trends? It's a composition effect. As lower-income workers retire (or die) sooner than higher-income workers, the average rises much faster as the "mix" of workers tips toward the affluent. And clearly that tipping has been happening faster during the more recent decade. (See "Are Retiring Boomers Suppressing Wage Growth?")
When asked in a 2017 survey, roughly 29% of workers ages 61-66 said they wanted to reduce their work hours and transition gradually into retirement, but only 15% reported actually doing so. But among pre-retirees and recent retirees with higher-than-average household savings, the share who planned to do this matched the share who actually did so (17%).
In short, phased retirement is a great idea. It's just too bad it's mostly available to those who need it least--and least available to those who need it most.
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ABOUT NEIL HOWE
Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.
A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.
Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."
Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.
Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.
Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.
