Many trends point to the benefits of phased-in retirement. A recent report by the Organization for Economic Co-operation and Development underscores the future fiscal unsustainability of rising social security costs. This could be done by encouraging workers to stay in the work force longer via phased-in retirement. From a practical perspective, individuals who begin paid employment later in life, or who interrupt employment due to education or family care needs, for example, may either want or need to remain working longer. This growing legion of workers probably requires a set of more flexible pension plan rules that will not unduly penalize them for having followed non-traditional career paths.
Employers can reduce payroll costs by implementing phased-in retirement.
In addition, this approach may create additional employment opportunities within their organization, ensuring higher morale by satisfying the individual needs and aspirations of workers. At the same time, employers can continue to draw on the energies and knowledge of experienced workers, albeit for reduced periods of time. Employees who can afford to do so may want to broaden their horizons outside of the confines of working life. The continued regular earnings that a phased-in retirement provides may help them to realize some of these other goals while adjusting to the reduced income that usually accompanies full retirement. The Mercer report concludes that the current set of supervisory rules and regulations surrounding existing occupational pension plans, in both the private and public sectors, would need to be modified in a number of ways to facilitate a broader adoption of a phased-in approach to retirement.