Is a Phased Retirement Right for You?

Not done working? Phased retirement might be the next best thing.

Coworkers gather around a retiring member holding a gift and clap as the pose for a photo

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One day you’re a full-time employee and the next day you’re not. That’s how retirement can feel. However, if you’re looking for more of a gradual exit — or no exit at all — you might consider phased retirement, where you gradually reduce your work-week hours and responsibilities.

America Has a Problem

America has a big labor problem: a massive amount of highly skilled workers are retiring or have reached retirement age, and that has companies concerned. Not only are people at retirement age, but they may also hold all of the high-level knowledge. Even worse, many industries are experiencing a shortage of young workers to fill the gaps.

On the other side, many of those 50 and 60-something workers don’t want to retire. A 2014 Merrill Lynch-Age Wave study revealed that 72% of pre-retirees over the age of 50 want to continue working in some capacity. The study also found that 80% of those surveyed said they work in retirement because they "want to."

A Win-Win

Rarely does it happen, but in this case, the two sides complement each other. Employers have an opportunity to retain employees of retirement age because they want to work. That’s where phased retirement comes in. Instead of completely retiring, those workers could reduce their hours, only work certain days, move to a less stressful department, or work from home.

According to a 2017 GAO report, companies report four key benefits to phased retirement:

  • Retaining highly-skilled, knowledgeable workers
  • Training and mentoring of younger, newer employees
  • Ability to transition workers into retirement
  • Easier forecasting of future workforce needs

For the employee, they receive benefits as well:

Are Companies on Board?

Despite employers hearing that pre-retirement employees aren’t ready to leave, and a clear benefit to the company, a surprisingly few companies embrace phased retirement. A study from the Transamerica Center for Retirement Studies (TCRS) found that 77% of employers believe that their employees plan to continue working after retirement. Still, only 31% of those companies embrace phased retirement.

Why So Negative?

The biggest reason seems to be the fear of lawsuits. Could a company open itself up to litigation if it gives a benefit to employees based on age? Because phased retirement often comes with an attractive benefits package, why can’t a younger employee work part-time and get the perks of a “phased” employee?

There’s also the management issue. Having employees coming and going on different schedules, and working only certain days makes it difficult for company managers who have to keep things operational and efficient every day. And, of course, some companies aren’t overly excited about paying for benefits like health insurance and retirement for employees who are now contributing half as much as they once did. Finally, it’s hard to promote somebody when there’s somebody else hanging around doing half of the job.

Tough on the Employee

Phased retirement has its benefits, but also some potential headaches for the employee too. Reduced work hours will likely mean some reduction in pay and the amount of money moving into their retirement accounts. There’s also the issue of continuing to earn an income if they want to receive Social Security benefits, and the urge for an employer to continue treating the employee as a full-time employee despite their part-time status.

How to Sell It

If you’re part of the pre-retirement workforce that wants to try phased retirement, it will take some salesmanship. First, make a strong case for how it will benefit the company. What’s the win-win for them? Second, consider learning a new skill. Is there another job that may not require full-time hours that would only require a little additional training?

Does your company need somebody to travel to other offices and train or evaluate? Do they regularly hire outside consultants in areas where you have expertise? Think of “outside-the-box” angles like these instead of fighting for your current position. Especially if what you do now is a full-time effort, and the company isn’t going to hire somebody to shadow you even for a short period.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. The Conference Board. "2020 Labor Shortage Report," Pages 1-2.

  2. Age Wave. "Work in Retirement: Myths and Motivations," Pages 3, 11.

  3. Transamerica Center For Retirement Studies. "All About Retirement: An Employer Survey," Pages 25, 28.

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