Help people work longer by phasing retirement


Most people hope their retirement will be like a warm bath: You work your way in slowly and gradually phase down your workload. For many, however, retirement from a job is more like a cold shower—it happens all at once and not exactly as planned.

There’s lots of talk that longer, healthier lives should mean longer working lives, that “60 is the new 50.” And there are plenty of reasons to think that’s true. Beyond the financial necessity of working and saving more in order to support a longer (and, with health-care costs, more expensive) retirement, extending work also provides mental, physical, and social benefits that themselves lead to longer and more fulfilling lives.

What’s missing, however, is the legal right to transition into retirement gradually over several years. If we’re serious about a transition to working longer, there ought to be a legal framework for doing so.

Many individuals recognize the need to extend their working lives, and they’re doing it—or at least trying. In 2016, 19 percent of Americans 65 or older were working full- or part-time. Most Americans expect to join them. A recent Transamerica survey found that 53 percent of respondents plan to work past 65; thirteen percent say they’ll keep working until they die. Furthermore, for many people working longer is a more effective way to increase retirement income than increasing their savings rate. Of course, health issues, caregiving requirements, and the vicissitudes of life mean that many of these plans don’t work out.

Many who do keep working find that it’s in a different job with a different employer, often with part-time hours that they don’t control—and at lower wages. We’ve all heard stories about older workers who start driving for Uber or greeting shoppers at Walmart.

Employers say they are on the “work longer” bandwagon, but too often that’s only rhetoric. A companion survey by Transamerica found that 74 percent of employers expect their employees to work in retirement, and 82 percent support the re-definition of “retirement.” Employers also report positive perceptions of older workers. They say older workers are “wiser, more reliable and responsible,” and “more effective at mentoring and training.”

In practice, however, studies routinely find bias against aging workers. Some argue that this is justified and point to higher employee-benefit costs. For example, under most health insurance programs, older workers cost more and have more health-related absences. Others point to a concern that, without a fixed retirement age, it’s hard to remove substandard employees. (Interestingly, one study of the University of North Carolina found that both faculty members and the university were better off, because low-performing faculty started the phase-down more quickly.)

But it’s easier to measure the costs of older workers than the benefits of having them. Those benefits are significant. They range from reduced turnover and onboarding costs to quicker productivity gains for younger workers through formal mentoring programs.

The most important question, however, is especially hard to measure: Are older workers less or more productive than younger ones? There are some intriguing studies suggesting that, at least in some circumstances, older workers may be more productive. One carefully researched study involving physical laborers at a European truck manufacturing plant found no loss of productivity among older workers; in fact, productivity increased until age 65. It turned out that, although older workers were slower, they made fewer serious mistakes. It’s also worth noting that hourly wages, a basic measure of productivity, are not only higher for older workers than younger, but the pay premium is increasing.

Employers may think they value experienced workers, but most don’t act like it. Only 20 percent offer any type of formal phased retirement program, and the majority have no plans to consider one in the future. Instead, most companies offer only one choice — continued full-time work or full retirement with no work at all. Clearly, if people are going to work longer, they’ll need other options.

Governments in some other countries have already acted. Japan and Singapore, where aging populations are already putting more pressure on economic growth, have enacted their own phased retirement programs. In Japan, where the mandatory retirement age, once 55, is now 60 and possibly moving to 65, the Continuous Employment Policy launched in 2013 provides workers guaranteed employment with their existing employer until age 65. Employees officially “retire” from the company at age 60 and then negotiate a new employment contract. Employees incur a 27 percent pay and benefits cut on average in exchange for 5 more years of guaranteed employment.


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