Phased retirement: work a bit, collect a bit
When Doreen Bellino, benefits supervisor at Mitre
Corporation in Bedford, Mass., went on phased retirement, it let
her see whether it suited her, and it allowed Mitre to hold on to
a key employee.
"Being in the benefits office
for 20 years I was familiar with all the plans and could answer
all the questions regarding medical plans, dental, life insurance
and the like," says Bellino, who is now fully retired. "I
was in phased retirement for eight months because I wanted to see
how it would work being home an extra day. I worked four days a
week, 32 hours. It allowed me to keep medical and dental at the
regular employee rate."
Mitre officials estimate that only six to 12 employees
take advantage of the phased retirement program each year. The company
employees 5700 scientists and support personnel, says Bill Albright,
director of quality work life and benefits, who expects the program
to become much more popular as the bulging baby boomer generation
marches toward retirement.
"Last year we ran some pre-retirement workshops
and we started talking much more about phased retirement. We're
finding it puts us ahead of the curve. It adds a flexible work option
and a mechanism for holding on to intellectual capital, which is
all we have. We don't manufacture anything."
Watson Wyatt surveyed 1,000 employees and found that
one out of three would continue working longer than otherwise planned
if phased retirement was an option. But some employers aren't quite
as enthusiastic about all of the proposed elements, says Paganelli.
"It's really been targeted for certain groups
-- people with critical skills. It's not necessarily for the broad
population. IRS rules require nondiscriminatory standards, but phased
retirement demands a level of flexibility as to who might be deemed
"Also, the IRS proposal sets 59 1/2 as the age
for phased retirement. It ties in with [the 401(k)] so it's a legitimate
age from the IRS standpoint, but many employers find it restrictive.
They're losing key employees who are retiring at 55, so the regulation
won't help as much as it could."
On the other end of the spectrum, AARP, the advocacy
group for people 50 and over, wants to see phased retirement kick
in at age 62.
"If you make it too young, some will leave the
workforce at an earlier age," says AARP attorney Signorille.
"The benefit of it is keeping people engaged in the workforce.
People live longer. Staying employed is positive. They contribute
to Social Security and to Medicare. Some say 62 is not young enough.
We don't know, no one knows. IRS can scale back at a later time.
If they use 59 1/2 and there's too much uptake, they can't put the
horse back in the barn."
As Signorille mentioned, everyone considering phased
retirement needs to crunch the numbers and make sure their financial
needs will be met. The IRS points out that while phased retirement
can give employees additional time to save for retirement, it can
also reduce retirement payments because the employee is receiving
money before normal retirement age.
Phased retirement for defined benefit plans won't
take place until final rules are published. There's no word yet
as to when that might happen.