GAO Report – Phased Retirement Programs are Lagging – The Government Accounting Office (GAO) was asked by the U.S. Senate Committee on Aging to review the current state of phased retirement programs for US workers as people struggle to save enough to retire while companies look to retain older workers with special knowledge. The results are not encouraging.
The GAO interviewed experts and companies using phased retirement and used information from the University of Michigan the federal Current Population Survey. Though many companies would like to offer phased retirement programs, very few formal ones are in place in part because of legal barriers.
A greater number of older workers than ever are still employed with most workers 61-66 still employed full time according to the GAO study. And though 25% of workers had planned to reduce their hours, less than 15% were able to.
According to a SHRM study, few industries offer phased retirement programs led by:
- Education – 12%
- Utilities – 10%
- Consulting – 7%
- Hi-tech – 7%
- All Others– 5%
The issues and implications around phased retirement highlight the new realities of corporate retirement plans for companies and individuals. According to Pew Charitable Trust research, less than 13% of US employees 65 and older were working full or part-time. That number jumped to 18.8% in 2016 and is expected to grow to 32% by 2021.
On the one hand, companies would like to retain certain highly skilled workers while also helping others that would like to retire but cannot afford to reduce payroll and other costs. On the other hand, some workers would like to stay employed though maybe not full time for various reasons.
401k and 403b plans were designed as a supplement savings to complement pension plans and Social Security. For middle-class workers, these plans are becoming the primary income replacement vehicles. As people live longer and technology enables many employees to be work remotely, phased retirement plans need to become an essential part of overall plan design, which, according to the GAO report, is severely lacking.
