Five years ago, Steve Bolduc, then 58, of Phoenix, was nearly burnt out, but didn’t feel ready for full retirement. “I liked the work,” says the project manager and principal transportation engineer. “I just couldn’t handle so many hours for an indefinite period of time.”
Bolduc’s employer, Stanley Consultants, welcomed him into the company’s optional phased retirement program, where pre-retirees volunteer to work a reduced number of hours instead of dropping from 40 or more hours per week to zero. Bolduc says he now works about 22 hours per week (compared to 50 when he was full time), and spends the other hours playing golf and racquetball and enjoying time with family.
See: [10 Retirement Lifestyles to Explore]
Phased retirement potentially benefits employees who want to stay sharp and maintain their sense of purpose into retirement, while their employers can retain experienced workers who might otherwise leave the company.
“The workforce is aging, but they’re still very capable of working and also wanting to experience life outside of the workplace,” says Lisa Orndorff, human resources manager at the Society for Human Resources Management.
As for Bolduc’s employer, the engineering consulting firm has about 20 pre-retirees working reduced hours and another 20 who are post-retirement but still available on a project basis (you’re considered post-retirement at Stanley if you’ve had a retirement party).
Dale Sweere, Stanley Consultants’ vice president and director of human resources, says it can be a win-win for both sides. “It allows us to take advantage of that relationship that the member has gained over the years, but also be there to introduce some of the folks coming up the line,” he says. “It allows that individual [in phased retirement] to stay sharp and active, and I think their quality of life is improved.”
Read: [Why a Mini-Retirement May Rejuvenate Your Career]
Soon, some federal employees will also have the option of phased retirement. The Office of Personnel Management will begin accepting applications for phased retirement from federal workers in early November. Mark Reinhold, associate director of employee services for OPM, says mentoring will be a key component of the program. “Phased retirees spend a minimum of 20 percent of their time mentoring employees,” Reinhold explains. “We’re making sure that we’re holding onto knowledge that otherwise would have walked out the door.” Individual agencies will determine how to roll the program out to their respective employees.
Whether you work for the federal government or a private company, Ken Zawodny, associate director of retirement services for OPM, stresses that “it’s important for individuals to really do their homework and understand the impact it’s going to have on them moving forward. Coming to work half the time sounds great, but you have to look at it closely.”
Phased retirement can complicate company policies and benefits, and only about 11 percent of organizations offer it, according to the 2014 Society for Human Resource Management Employee Benefits Report. Even at companies that offer phased retirement, not every employee is eligible. If you are, discuss your circumstances with your personnel department and consider these questions before you sign up.
— How big is my nest egg? Working fewer hours typically means collecting a smaller paycheck, so you may want to consult a financial advisor to make sure you have enough money saved before reducing your hours. Of course, if you need to slow down for health reasons, working fewer hours is likely better than not working at all. “Some people choose a phased retirement because their health begins to deteriorate, and maybe they’re only able to handle 25 hours per week,” Sweere says.
— How will this impact my health care benefits? Some companies may require you to work at least 20 hours per week to maintain your health care coverage, so check with your human resources department. You may still have other options if you choose to work fewer hours, such as buying your own policy through the health care exchanges or signing up with a spouse’s policy. If you’re over age 65, you’ll likely qualify for Medicare.
— How will this impact my pension? A different SHRM report, also from 2014, shows that among the 8 percent of employers allowing phased retirement and offering defined-benefit pension plans, three-quarters of them allow employees to phase into retirement without reducing their pension payouts. If you have a pension, talk to your human resources department to find out whether phased retirement might impact pension benefits.
— What about Social Security? Social Security benefits are based on your average monthly earnings for your 35 highest-income years. So if you enter phased retirement before you’ve worked for that long, it might shortchange your future benefits. While collecting Social Security, you can earn up to $15,480 per year without any reduction in benefits, but for every $1 earned over that mark, the Social Security Administration will withhold $0.50 in benefits until you fully retire or reach full retirement age (67 for those born after 1960).
See: [10 Best Places to Retire on Social Security Alone]
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Is Phased Retirement Right for You? originally appeared on usnews.com
