Phased Retirement

Phased (or gradual) retirement normally means that an older worker remains with his or her employer while gradually reducing effort and hours worked. The reduced work time is viewed as a step toward full retirement and can take the form of fewer hours per day, week, month, or year. The term phased retirement is sometimes used more broadly to include reduced work time associated with a change in employers, a move to self-employment, or even a reduction in the intensity of work without a change in hours. Here, however, the focus is on the narrower definition: reduced work time without a change of employers.

In terms of careers and career development, phased retirement obviously belongs to the final stages of a career. It enables workers to gradually reduce work activity while continuing to exercise skills developed at earlier points in the career. Workers can enjoy both the activities and social relationships that are central to a career while developing and pursuing other interests.

There are several potential benefits from phased retirement. Older workers can use phased retirement to make a smooth transition toward a less stressful schedule, a schedule that is perhaps less stressful than either full time work or full retirement, or a schedule that allows for maintenance of social networks, earnings, and a sense of efficacy but that also accommodates a possible age-related reduction in stamina or capacities. From an employer's perspective, phased retirement can retain experienced employees with specialized knowledge of their job and of the larger organization. Finally, from the perspective of the larger society, phased retirement could extend the work life and thereby reduce pressure on private and public pensions (e.g., Social Security).

The idea of phased retirement is not new. It has been the subject of expert discussion for decades. Nor is it simply an academic idea; there is a long history of private sector employers permitting older workers to reduce their hours as they approach full retirement. Books written in the 1950s about employment of older workers often included discussions of companies with functioning phased retirement plans.

Given that the idea has been around for decades and that older employees often express interest in phased retirement, it is somewhat surprising that phased retirement is evidently quite rare. According to the Health and Retirement Survey, in 1996 more than half of the employed respondents age 55 to 65 preferred to gradually reduce their hours of work as they aged. Yet studies from the 1970s that followed a cohort of older workers as they moved to complete withdrawal from the labor market indicate that less than 10 percent took phased retirement; most people simply moved from full-time work to full-time retirement, and those who become part-timers frequently change employers. More recent data collected by the Health and Retirement Survey indicate no substantial change in these numbers.