Phasing Out: the new way to retire


As an HR business partner, I have noticed how many employees were opting to gradually move toward retirement rather than immediate retirement. Over the years, I have seen many of my peers experience uncertainty when closing this chapter.

Gradually closing this phase of life or transitioning out of the workforce seems to alleviate much of this angst. This phasing out or transitioning out of the workforce is commonly called a phased-out retirement.

Phased-out retirements are a broad range of employment arrangements that allow an employee who is approaching retirement age to continue working with a reduced workload and eventually transition from full-time work to full-time retirement. Phased retirement may include a pre-retirement gradual reduction in hours (or days) of work, and/or post-retirement, part-time work for pensioners who wish to remain employed.

The most recent economic problems has many of us postponing retirement while others are wondering if they’ll have to work forever. In between are those who would like to work part-time for their current employers for a couple of years before taking the final plunge into retirement.

In a 2008 survey, Hewitt Associates predicted that by 2012, 60 percent of employers expect to offer a formal phased retirement program. Today, more than 60 percent of employers offer these types of program, including nonprofit organizations.

Phased out retirement is seen as a benefit by many older workers, as it allows them to maintain a higher income than they would receive if they quit work entirely. From the employers’ point of view, phased retirement programs can be used to retain skilled older employees who would otherwise retire (especially in sectors where there is a shortage of entry-level job applicants), to reduce labor costs, or to arrange the training of replacement employees by older workers.

But how does this option impact employees long term?

While phased-out retirement has advantages, there are potential setbacks that could occur. For example, some employees who would have continued working full-time will elect phased retirement and thus accumulate less retirement savings than they would have otherwise. Benefits may be reduced because the participant’s benefits reflect the employee’s part‐time pay in the last years of employment.

Before you consider a phased-out retirement plan, check with your employer for plan details and familiarize yourself with legislation such as the Pension Protection Act and your 401(k) payout requirements.


Tammy McIntyre is owner of McIntyre Employment Service, an agency providing individuals and small businesses with career development services. She welcomes reader responses to tammy@mcintyre-