Not Ready to Retire Yet? What About Semi-Retirement?
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Why did so many older workers retire during the pandemic and how did it create gaps in companies?
Here's your Money Briefing for Wednesday, March 16th. I'm J.R. Whelan for The Wall Street Journal. Baby boomers left the workforce in droves during the pandemic. Many more, and in some cases, much earlier than companies were expecting. And with that mass exodus went years of experience. Now, as the next segment of the workforce gets ready to retire, some companies are offering older workers an opportunity to enter retirement more gradually.
What is phased or semi-retirement and why are companies offering it now?
It would allow them to continue working longer, but at a reduced number of hours, which gives them, you know, a potentially better work-life balance. But it allows them at the same time to continue collecting, you know, some level of income.
On today's show, we'll talk with our reporter Anne Tergesen. She's been looking into phased retirement programs that allow workers to ease their workload without giving up their job completely. That's after the break.
Up to 2.6 million more people retired in the first year and a half of the pandemic than were expected, according to the Federal Reserve. That's left many companies with significant gaps in their rank and file and a willingness to explore ways of stemming the flow of current workers into retirement. One option more companies are offering? Phased retirement programs. So what are the benefits for companies and workers? WSJ reporter Anne Turgason joins us to talk about it.
What business challenges and legal concerns do employers face when creating phased-retirement programs?
Anne, it's great having you with us. Thanks. So Anne, what's prompting companies to offer these programs?
A couple different things. First of all, we have a very hot job market. We have a very tight labor market. And so it's hard for companies to attract workers in this environment. I think they want to focus on retaining the ones that they have as much as they can. We also have... aging society and we've seen a wave of unexpectedly large wave of retirements since the pandemic started. So companies what they hope to get out of it is that they can retain some of their older workers who might be on the verge of retiring for longer and you know some of them very explicitly do so in order to enlist those older workers in helping to train replacements.
Now these phased retirement programs are growing in popularity, but are there potential hurdles that companies face that offer them?
There can be. For some employers, they are concerned about, you know, the potential for lawsuits, because typically when employers implement like a formal phased retirement program, they often will allow any employee who meets, you know, certain basic criteria, like maybe, you know, they're above a certain age, like maybe above 55, and they have a certain number of years of They'll allow any of those people to apply, but they won't necessarily accept every employee who applies. So some employers are concerned about lawsuits because of that, just because their programs are selective.
How might phased retirement affect company costs and workforce planning?
And it can be perceived as unfair by those who don't get selected for the program. There are some other, you know, sort of potential difficulties just depending on the way an employer's 401k plan works or depending on how their pension plan works. If people are working in a phased retirement program and they're working part-time, they may want to tap into some of the retirement benefits, but those plans may not allow it. Many do, but some don't.
Okay, but doesn't this also add a layer of expenses that a company has to deal with?
Yeah, in some cases, you know, some employers are, they recognize that older employers typically are paid more and that they may cost more in other ways, you know, including in some benefit areas. And so, you know, some employers who are very focused on the costs, probably for them, a phased retirement program may not be a good fit because in some cases they may prefer to have these older, more expensive employees move on sooner rather than later.
All right, now let's look at this from the perspective of workers. Why would phased-in retirement programs be appealing to them?
So for workers who might be thinking about retiring, typically when you retire, there's sort of this cliff effect where you're sort of earning a full-time salary and you're working full-time, and then all of a sudden you just stop working and you stop earning.
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Chapters
6 chapters
1
Why did so many older workers retire during the pandemic and how did it create gaps in companies?
0:05–0:29
2
What is phased or semi-retirement and why are companies offering it now?
0:29–1:27
3
What business challenges and legal concerns do employers face when creating phased-retirement programs?
1:27–2:59
4
How might phased retirement affect company costs and workforce planning?
2:59–4:45
5
Why do workers find phased retirement appealing and what real-life examples illustrate this?
4:45–5:39
6
How do phased-retirement programs typically work and what should employees check before joining?
5:39–7:06
Speakers
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