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Phasing into retirement: Is it for you?

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Some people think that they will work “until they drop” and others can’t wait to “take this job and shove it” but there’s another option for people in the middle and not quite interested in giving up the benefits or the pay or even the relationships but still wanting to slow down a bit and take in all the grandkids baseball games or spend some time travelling and fishing. 

We all know the Baby Boomers are reaching retirement age in record numbers but what you might not know is that for companies it may become necessary for employers seeking to keep jobs filled to consider implementing practices to make a phased retirement practical for both employees and themselves.  A dip in the number of younger workers to replace those retiring is projected to pose labor and skill shortages for the next 20 years.  In 2005, AARP surveyed people 50 and over, 38 percent liked the concept and four out of five indicated that a phased retirement would encourage them to stay in the workforce longer.  Last year Congress passed legislation to permit federal employees to ease into retirement but Congress hasn’t yet put into place the requirements (although they are getting closer) to make that possible.   While colleges and universities have been early adopters according to AARP, a 2010 survey by AARP found that few companies have followed Stanley Consultants engineering firm’s example.

The benefits for both employee and employer can be win-win as the expression goes.  A phased retirement gives individuals a transition period to smooth out the period of time from employment and retirement.  Then too, our longer lives mean that there is a greater financial strain on retirement budgets and a transition can help extend the period of time their retirement budgets can support and provide an opportunity to discover what it’s like to live on a lower income.  Continuing work can also extend health and other benefits that can be costly for individuals to cover.  For companies, extending the time frame that employees work can help to maintain continuity with essential business partners, reduce costs associated with hiring and training new employees and increase organizational flexibility.

To get an idea about how a phased retirement might look to federal employees, go here.

The problem with something new (it’s been done in Sweden since the 70s but is not used extensively yet in the United States) is that there are problems.  The first cars of a new model have a shakedown period as do computer or other new technologies.  The same can be said here.  So there are potential problems related to health care, pension and of course Social Security.

If you are considering a phased retirement, you should talk to your financial advisor and your human resources expert to make sure the adjustments you are planning to make are something you can live with.

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