Tapering Into Retirement

There’s a slow but growing trend of workers thinking about a phased approach to retirement. The idea is that instead of working full tilt to some predetermined age and then quitting cold turkey, you start backing off from the 40+ hour work week earlier. Maybe you cut your week down by a day for a few years, followed by another and another until you’re eventually fully retired. You’d get more time with family, friends and your favorite activities, but also more years of income. I refer to this as tapering into retirement, but you can call it whatever you like.

While this might not meet the standard definition of retirement, and certainly not the “corporate” definition, it’s what would probably work best for most people. Many folks haven’t saved enough to retire early but don’t necessarily want to work full-time forever either. Part-time jobs during retirement can help with this, but people aren’t looking for just any job. Many simply would like to keep doing what they’re currently doing, only for less time and with less stress. Having three-day and then four-day weekends on a regular schedule would be nice, right? Maybe it helps strike a balance between wanting to slow down a bit while also remaining relevant and engaged in the workforce.

Tapering would also probably work best for most companies, even though it cuts against the grain. Employers large and small would get to keep their intellectual capital around longer while also making room for the next generation. Employers could (and probably should) keep these tapering employees on their benefit plans. The cost would likely be covered by the pay differential between those tapering and the younger staff members taking their place.

The tapering concept also makes sense from a technical planning perspective. While there would be less income during the beginning of the tapering process, the worker would probably continue working longer by avoiding burnout. This leads to more income for the household over time, fewer draws from retirement savings, delaying taking Social Security, and so forth, all of which helps shore up one’s retirement plan.

Perhaps the massive reconsideration of work and the workplace going on right now will cause Corporate America to wake up to new thinking about transitioning employees into retirement. Only time will tell, but at least one concept seems clear: the slow shift to virtual work has accelerated dramatically. This might help pave the way for would-be taperers.

Along the lines of tapering into retirement, check out the following article, “Losing the Retirement Assumption”, by Mitch Anthony, a thought leader in the financial planning industry.

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Over the last two years I’ve had the privilege of speaking at a gathering for employees of the American Transmission Company (ATC) based in the Milwaukee area. The first time I spoke to one of the groups, the employees that had gathered ranged from age 50 up into their mid-60s. They sat in for a full-day workshop on the topics of well-being and retirement.

Before the day commenced, I asked the company’s CEO, Mike Rowe, what had motivated ATC to put together a day like this for its employees. His answer surprised me.

“Our company is only 17 years old,” he said, “and we have yet to see a single employee retire. We want to help our employees think through the issue and make the right choice for them and for us.”

ATC produces and operates high-voltage electric systems that provide pathways of power into communities. It was founded as the first multi-state, transmission-only utility in the United States. Its focus is transporting power from where it’s produced to where it is needed. Beyond just transporting power, it wanted to empower its employees too—to make decisions for themselves in the long run.

Too many corporations still force their employees to fit their lives into anachronistic models of retirement that no longer reflect current realities. These companies can no longer claim ignorance that a “phased retirement” model is right for the times—a model in which older employees follow a glide path into fewer hours and less demanding work. This is best for everybody, including the employees, the corporations and their communities.

Transamerica’s Center for Retirement Studies has been conducting a survey on this topic for almost two decades now, and little has changed in that time despite a growing awareness that the old model of pushing people into retirement at age 62 to 65 no long serves its purpose—if it ever did in the first place. According to the latest survey conducted by Transamerica, just 31% of employers let their employees shift from full-time to part time, and only 27% allow them to assume positions that may be less stressful and demanding. This is the case despite the fact that 77% of the employers believe their employees want to continue working and 47% believe their employees are envisioning a phased retirement.

The bottom line here is that companies are quite aware of this current state of employee mentality, but most of them are acting as if they weren’t.

And they’re talking out of both sides of their mouths on the issue. Of those 1,800 employers surveyed (those ignoring the demand for phased retirements), 71% say they are “aging-friendly” and that they offer work arrangements and training for employees of all ages to be successful. All ages up to 60 is what I think they meant.

The beauty of the phased retirement approach is that both the company and the worker have time to adjust rather than being forced to deal with the realities when the employee’s work suddenly stops. The problem for the corporation is a brain drain and loss of experience, intellectual capital and the network of relationships established by the retiree. The chief problems for the retiree include not only the retirement whiplash of waking up with no challenge or focus, but also the ensuing identity crisis and boredom that so many experience.

Phased retirement allows both parties time to adjust. Those employees phasing out of work can mentor their future replacements and download their decades of experience and knowledge. Without that approach, “years of institutional knowledge could be walking out the door,” says Susan Weinstock, vice president of financial resiliency at AARP. I’ve been pounding this drum since 2001 when I first published my book The New Retirementality (now in its fifth edition). I am stunned at the lack of progress our corporations have made. They are failing their workforces—and it need not be so.

Employers know this is a looming issue. According to a Willis Towers Watson poll, 83% of large employers report that significant numbers of their employees are approaching “retirement age.” Fifty-four percent of these companies also acknowledge that the loss of talent will be more significant than other labor market risks. So why not revisit the 135-year-old idea of retirement starting between the ages of 62 to 65 and get with the program? According to Willis Towers Watson, only one in 10 large corporations currently offers a formal phased retirement program allowing workers to cut back on hours before they permanently cut the cord.

The American Transmission Company is an inspiring example for us all, and a model for other companies to follow. Having the unusual perspective that comes from being a relatively new company without retirees, the firm has brought modernity into the discussion, recognizing that what is best for the employees is best for the future of the company. Some employees will retire early and some will retire later—but all are empowered to do what is best for themselves.

There are other examples, some cited in a 2017 report by the Government Accountability Office:

• One program allows workers who are at least 55 years old with 10 years of service to cut their hours by 20% with a 20% cut in pay. They can keep their health insurance and pension accrual benefits.
• Another program allows employees age 60 and older with five years of service to reduce their hours by 20% to 50%, or even more if they're willing to lose their health insurance benefit.
• Another employer allows workers age 55 and older with seven years of service to negotiate their own “glide path” to retirement, ramping down from full time to full retirement while retaining benefits.
• Another company allows any employee to switch to less stressful or complex duties or phase to part-time work, retaining health insurance if they work at least 25 hours a week.

It should come as no surprise that the employers who offered phased retirements told the GAO that the plans are “good for business.” The American Transmission Company’s slogan is, “Keeping the lights on, businesses running and communities strong.” And like ATC’s slogan, phased retirement keeps the lights on cognitively, aids in intellectual transfer, and keeps businesses running smoothly on the transfer of knowledge and experience. This all adds up to a stronger and healthier community … because everyone is well-served in the proposition. 

Here’s a link to the article:

https://www.fa-mag.com/news/losing-the-retirement-assumption-55310.html?section=47

Have questions? Ask me. I can help.