Phased Retirement: Is It a Good Idea?

After a few years of long hours spent behind the office desk, people form very strong ideas about how they want to spend the rest of their life and specifically their career. They believe that they are done with the 16-hour workdays and working weekends and now want to have a better work-life balance. However, they do not want to go from a life spent in the office to a life on a beach. They just want to cut down on their work and focus on the other aspects of their lives that they have ignored thus far.

Although this was not even thinkable in the past, in the recent years, owing to the concept of phased retirement, these people have an option to choose the middle path between fulltime employment and complete retirement. Many companies today have started offering their senior employees the option to work reduced hours on a relatively flexible schedule and even collect some retirement benefits in exchange for a decreased pay.

This emerging trend of phased retirement is catching on quickly and is attracting the interest of a majority of workers in the age group of 50 to 70 years who like the idea of working part-time before complete retirement.


Simply put, phased retirement is a concept that allows senor employees to work unconventional or part-time hours at a reduced pay while being eligible for some of their retirement benefits at the same time.

Although as yet, clear laws governing phased retirement have not been formulated at the federal or state levels, many companies are offering it to their senior workers at an informal arrangement. These companies believe that the concept of phased retirement helps them retain their senior employees for a longer period of time and helps in the knowledge and experience transfer from the senior to the junior employees. Further, they say that the senior employees can retain their complete retirement benefits if they agree to work for a minimum of 20 hours every week.

Now, one may question that if phased retirement is such a good concept and is increasingly gaining popularity with both the employers and the employees, why have the employers not formalized the phased retirement program? Well, this can be attributed to the fact that the federal government is yet to formulate the guidelines for the retiree medical coverage and the distribution of the defined-benefit pensions under phased retirement.

Add to this, the law introduced in 2005 that prevents employers from giving partial pension payments to workers who work reduced hours before retirement. Also, in some states, there is a requirement that employees directly go from full-time employment to complete retirement in order to collect their retirement health benefits. However, the Pension Protection Act introduced in 2006 allows workers who are 62 years of age or older to receive their pension even if they are working part time.

Even if these new regulations provide an opportunity to senior employees to consider phased retirement, a formal phased retirement program is required for more such employees to benefit from this concept. This would give them a chance to balance their work and personal lives and keep them happy. Also, at their level and with their experience, they do not need to put in a large number of hours in order to be effective. They could be equally effective in a mentor's role even if they worked fewer hours.