TODAY'S PAPER
58° Good Afternoon
58° Good Afternoon
Business

Phased retirement's multiple benefits

John Sayles, 79, a planner at Stanley Consultants,

John Sayles, 79, a planner at Stanley Consultants, is among the workers at Stanley who have participated in a "phased retirement." (May 3, 2013) Photo Credit: AP

There is an oft-told story about what happens when a worker at the Stanley Consultants engineering firm decides to retire.

 

"They say you have the retirement party one day and you come back to work the next," said Mary Jo Finchum, spokeswoman for the Muscatine, Iowa-based company.

 

Stanley is among the U.S. employers that have offered workers a softer landing into retirement, allowing them to scale back hours as they prepare to take the plunge and move into part-time positions once it's official.

 

"It's really the best of all worlds," said John Sayles, a 79-year-old planner at Stanley who cut his hours before formally retiring in 2003, but who has continued to work part time in the decade since. "I'll probably do it as long as the company would like me to help out."

 

Like most phased retirement programs, Stanley approves participants case by case. Those who take part before officially resigning must work at least 20 hours to maintain their health benefits. Once they've officially retired, workers can cash in shares through the company profit-sharing plan and make 401(k) withdrawals, even if they continue to work part time.

 

Dale Sweere, Stanley's human resources director, said phased retirement gives employees a way to maximize their retirement savings and the company a way to retain a highly experienced employee who often has built close ties with clients.

 

It also slows costs and productivity losses tied to turnover, and responds to a desire from employees who want to remain engaged in work, just not as much.

 

"They don't want to just walk away from the profession," Sweere said. "And to try to replace these people, especially with the amount of experience they've gained, is very difficult."

 

The phased retirement idea was born in Sweden in the 1970s and gained a foothold in the United States soon after.

 

Sarah Rix, a policy adviser at AARP who worked on the issue in its early years, said it has been hard to quantify how many people have taken part in such programs because most are informal.

 

A 2010 study by AARP and the Society for Human Resource Management found that 20 percent of employers had phased retirement programs in place or planned to start them.

 

Businesses see it as a way for employees to transfer knowledge to their replacements and to mentor younger workers. It also is a way for them to reduce the payroll without losing a valued employee's expertise and experience.

 

Phased retirement has been most widespread on university campuses and, to a lesser degree, among government and health care workers. It has been far less common among blue-collar workers.

 

"Some jobs are rather easy to split," said Robert Clark, a North Carolina State University economist. For example, he said, professors teaching two classes a semester could easily trim their schedules. The salary savings might go toward hiring a less-experienced, less-expensive instructor.

 

Many formal phased retirement programs let employees maintain health insurance, vacation and other perks, and continue building up their retirement benefit.

 

Others are more like consulting agreements, with retirees returning to work as independent contractors without benefits.

Comments

We're revamping our Comments section. Learn more and share your input.

More news