The TaxGuru has a great cartoon here. The implications of the cartoon and this other cartoon here are that baby boomers (Americans born between 1946 and 1964) are headed for a rude awakening due to a lack of savings, more and more employers cutting back on pensions and other retirement programs, and the bleak forecast for Social Security. However, on the other hand, with demographics indicating that many boomers may be leaving the workforce, taking their skills and experience with them, employers may be the ones encouraging boomers to continue working–albeit on a semi-retired basis. That brings up the topic of phased retirement and the fact that, in order for employers to be able to offer phased retirement on a larger scale, many legal barriers to phased retirement will need to be addressed by Congress and governmental agencies. This article from the National Association of State Retirement Administrators (NASRA)–“Phased Retirement Overview:Summary of Research and Practices” by Keith Brainard (October, 2002)–describes in detail many of the legal barriers, but also lists some of the reasons both employers and employees may want to eliminate such legal barriers soon:
The chief advantages of phased retirement programs for employers are:
- retention of trained and qualified personnel, especially for positions that are difficult to fill;
- reduced costs associated with training new employees to replace retiring employees;
- reduced costs achieved through lower salary and benefits expenses, made possible by employees shifting from full-time to part-time status.
The chief advantages of phased retirement programs for employees are:
- flexible work arrangements;
- the opportunity to gradually transition into retirement rather than making a sudden, abrupt shift;
- the opportunity to supplement retirement income or to increase future retirement benefits by deferring current retirement income.
More items on the topic of phased retirement:
(1) Statutory Reforms Needed to Allow Phased Retirement by Baby Boomers from the Urban Institute.
(2) Comments from The Working Group Report on Phased Retirement submitted to the Advisory Council on Employee Welfare and Pension Plans, known as the ERISA Advisory Council, on November 14, 2000.
(3) American Academy of Actuaries Comments to the IRS regarding Phased Retirement Issues (December 30, 2002)