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Wall Street Journal Report: In a Major Post-Pandemic Shift, a Growing Number of Companies Now Offer Some Type of Phased Retirement

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Apparently, all it took was a two-year pandemic to get U.S. companies to see the light concerning the benefits of phased retirement. That’s a plan we’ve written about many times here on the AgingOptions Blog under which aging workers get to ease gradually into retirement, reducing work hours but keeping some pay and benefits.  Now the idea finally seems to be gaining traction as companies have learned the important lesson (taught by the pandemic) that workplace flexibility can benefit workers and employers alike.

In this recent Wall Street Journal article, reporters Anne Tergesen and Lauren Weber write that the pandemic appears to have triggered a major shift in employer attitudes about phased retirement. Could this be the wave of the retirement future? Let’s take a look.

Companies Finally Giving Workers What They’ve Wished For

The article begins, “Plenty of older workers have wished for something between full-bore work and retirement. Now, more companies seem to be giving them what they want.”

Thanks to the pandemic, programs for phased retirement, allowing “workers nearing retirement age to cut back on their hours while keeping some pay and benefits,” are becoming increasingly popular. “Human-resource executives say the pandemic has opened bosses to flexible work arrangements,” the article states, “while the fierce hiring market and higher-than-expected rate of retirements have motivated managers to find ways to retain older workers with key skills.”

Twice as Many Firms Now Offer Phased Retirement

The rise in popularity isn’t a small bump, either. “In a forthcoming survey of 1,736 HR executives world-wide from consultant Mercer LLC,” the article says, “about 38 percent say they offer phased retirement, more than double the 17.2 percent that did so before the pandemic.”

And in the U.S. alone, the numbers are surprising. In 2021, 23 percent of U.S. employers offered phased retirement programs, up from 16 percent in 2016. “A growing subset—8 percent, up from 6 percent in 2019—have introduced formal programs, which generally target older workers who meet certain criteria. Another 15 percent offer the option on an informal or ad hoc basis, frequently to employees in hard-to-fill roles,” the article explains.

Phased Retirement to “Slow the Brain Drain”

Phased retirement is not a new idea. “Universities have long offered phased retirement programs to tenured professors, in part to make room for younger faculty,” the article says. “Others with the benefit include the federal government, some law and accounting firms,” and a small number of other companies.

But the pandemic threw a wrench in the works, causing a higher number of baby boomers to push their retirement plans forward. According to the article, “From February 2020 through November 2021, up to 2.6 million more people retired than were expected to, given pre-pandemic trends.”

Along with this, thanks to the aptly-named “Great Resignation,” the pandemic saw a huge movement of workers of all ages leaving the workforce. This is especially damaging for industries in need of workers with hard-to-replace skills. This loss of talent is known as “brain drain,” and it’s a massive problem for today’s employers. Phased retirement is seen as a remedy for such problems. 

But phased retirement is also a boon for the financial and psychological well-being of retirees, since going from all work to zero work too quickly can take a damaging toll on mental health. The benefit is a win-win for all concerned, especially if the emphasis is on training new workers to take the retirees’ places after they fully retire.

Obstacles Remain for Employers

Phased retirement is not without its issues, especially for employers that have never offered it before. “Among companies adopting phased retirement programs, figuring out how to provide benefits and set criteria for participation can be a sticking point in some HR suites,” the article states. “Potential legal and financial complications loom, consultants say, not to mention the fact that some companies would like their longest-tenured people to move on.”

Other obstacles include the potential for lawsuits, especially if not every worker in a given workplace is allowed to participate in the program, and the financial implications of some employers’ rules around pension plans. “People phasing into retirement may want to tap their retirement benefits to supplement a lower paycheck,” the article explains. “Many employers allow employees ages 59 ½ or older to tap their 401(k) accounts without penalty, but some don’t. Although companies can amend their pension plans to allow workers to take partial withdrawals starting as early as age 59 ½, that can backfire if it encourages more people to retire early.”

Phased Retirement Variations

To end the article, Tergesen and Weber give a series of anecdotal stories of real-life phased retirement examples. For our purposes, however, the interesting thing about each story is the diverse ways that phased retirement can look. For example, the straight-forward model is reduced hours and pay – leaving benefits intact – while the retiree trains their replacement. This is a win-win for both worker and employer, and one manager even calls it a “no-brainer”.

In a more formal version of the program, Toledo-based conglomerate Owens Corning offers this model: “Salaried employees age 55 or older with at least five years at the company can ask to be considered for the program, which allows part-time work and pay with full-time benefits, including health insurance, often for three to 12 months.” This program was built in 2020 to meet the rising tide of retirements anticipated by the company, and according to Owens Corning it has been popular.

Another variation, adopted by Unilever, is called U-Work. This model combines “elements of contract work with some stable pay and benefits.” It has been very popular in Europe and may potentially begin in the U.S., too. “The initial goal was to retain older workers who want to phase into retirement,” the article explains. “Rising demand for flexible work prompted Unilever to make the program available to employees of all ages.”

Here’s how it works: “Employees in U-Work can take breaks between assignments, some of which entail part-time commitments. In return for committing to working a certain number of weeks a year, employees receive a monthly retainer fee and some benefits, including a 401(k)-style retirement plan. During an assignment, they earn additional income at the rate set for the job.”

The point is this, as we see it: phased retirement isn’t just a fringe idea anymore, or something offered only by elite workplaces. It’s becoming the norm. It comes in all shapes and sizes, and certainly there will be more variations popping up all the time. And frankly, we here at AgingOptions couldn’t be more pleased to see the benefits of phased retirement entering the mainstream.

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(originally reported at

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