Phased Retirement
The Aging of the Workforce: Demographic ImpactThe confluence of two important demographic shifts promises to reshape the U.S. workforce over the next decade and beyond. First, there will be more workers over age 55. In 2000, 13 percent of the workforce was 55 and older, according to the Bureau of Labor Statistics, and by 2015, this figure is expected to rise to 20 percent. During the same period, the highest growth rate in the U.S. workforce will be among workers aged 55 to 64 (Haidee Allerton, 2000). That change is fueled in large part by the leading edge of the baby boom population, which is now crossing the age 55 threshold in large and expanding numbers. It also reflects the fact that Americans are leading longer and healthier lives, enabling them to extend their stay in the working world. As the boomer population moves through the workforce and retires, there will be more jobs than workers to fill them. This is due in large part to the smaller size of the generations following the boomer cohort. Consequently, the U.S. will grow older and face critical shortages of qualified workers, especially in the dominant and growing service sectors of the economy. Mercer survey respondents report that they generally see their own compa
Retiree pools can be used to offer continued work to retirees on an occasional basis. Employers with workers who average 45 to 49 years old are almost twice as likely to offer phased retirement than are businesses where the average age is under 45. The changing nature of work over the last several decades supports a view of retirement as a gradual process rather than a one-time event. comChanging Perspectives of Employer and EmployeeUntil recently, most businesses were happy to see older workers retire early, rewarding them with extra benefits during early retirement window periods or providing special severance benefits during business transitions. Clearly, employers that address the changing demographics as a strategic human resource issue will have an advantage over those that ignore the changing demographic landscape. In most cases, the normal performance evaluation systems should suffice, but in some restructured jobs these systems may need to be refined. Research also shows that although employees are often pleased with the incentive of extra benefits, they often feel a buyout is the best of imperfect choices (Xenia Montenegro, 2002). A formal policy that is widely supported will allow a company to align its actions with corporate policy and minimize the number of employees "retiring" early to go to work for the competition. v An employer must be able to assess an employee's performance and provide a forum for response. To achieve a successful phased retirement program, each new job must complement the organization's business mission and the participating employee's needs. comAlternatives to Formal Phased Retirement ProgramsFormal phased retirement programs are still in their infancy, and businesses are still learning about the varied approaches they may pursue. Benefits of Phased Retirement ProgramsLooking at these patterns, businesses are now seeing an opportunity to address the labor shortage by cultivating the fastest-growing segment of the population - older workers - through flexible phased retirement programs. Furthermore, public policy is shifting to favor phased retirement programs.
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