Economic worries and the rising cost of health care have many baby boomers concerned that they'll outlive their retirement savings. Some are opting to phase slowly out of the workforce instead of leaving permanently. Phased retirement poses challenges for workers and companies, but it could be crucial to retaining a talented workforce.
Gail Langan belts out the Beatles tune "When I'm 64" on her bugle. She's not there yet, but retirement is near. The 56-year-old IBM project manager wanted to have more personal time and to play in a drum-and-bugle corps, so she works from home four days a week. It's her version of phased retirement. She has a plan, but her husband died suddenly six years ago, she's contributing to her son's college education, and selling her house is part of that plan.
"The housing market now impacts my plan to sell the house. The economy itself, yes, it's concerning me because you have this nest egg that you're building and then all of a sudden things are starting to go down," she says.
Langan is phasing into retirement. A 2007 report from the Employee Benefit Research Institute suggests that the number of older Americans working is increasing. In the 13 previous years, there was a 30 percent uptick in those ages 55 and older choosing to remain in the workforce.
It's in the best interest of big business to adjust, says Ellen Galinsky, president of the Families and Work Institute.
"Employers, given the talent shortages, given the war for talent, given — particularly in some industries — the lack of people with knowledge and experience that are critical to their business, are allowing people to ease into retirement," Galinsky says.
But she says only about one-quarter of companies allow all or most workers to phase into retirement. There are tax questions and challenges around retirement benefits. For example, for employees who are phasing out, how much do they need to work? When can they start drawing on their retirement benefits while still working? How much can they take out? Do they have to leave the company and then come back as a temporary employee?
"I think the challenge is always on the immediate manager," says Karen Parish, a vice president at IBM, which has been a leader in flexibility and phased retirement for years. Parish says IBM treats employees such as Langan not as an expense, but as an investment.
"We're investing year after year after year in their skills, in their competencies. Why would we want them to leave? That's what we give back to our clients," Parish says.
Skilled workers are critical in competitive industries right now, according to Jeri Sedlar, the author of Don't Retire, Rewire and a senior adviser to The Conference Board. She says sectors like health care, education and engineering are starting to offer phased retirement in the heat of a tightening job market.
As for the others: "If they're not looking forward, if they haven't done an assessment, if they really aren't open to creating some flexible solutions, they could lose some valuable talent to their competitor," Sedlar says.
As for IBM, Langan will keep working — albeit on a more flexible schedule.
"It's not like I'm retired or I'm working a lot less, but I am starting to think about that. Where do I want to live? What do I want to do? At this point in my life, I'm not so sure it's the social contacts and the interests that I really want to be giving up," Langan says.
She won't be giving up the bugle. Having Fridays off helps; she can get errands done and get an early start on the road for those weekend music gigs.