Retirement Transition Options Explained
Al Waller: You may have noticed that trends in retirement have really begun to change or at least start to shift – and unlike prior generations, when someone worked full time until their retirement party where they may have received a proverbial gold watch, then ridden into the sunset never to work again. However, today a significant number of workers are phasing into retirement, while others are continuing to work in retirement.
Welcome back to ClearPath – Your Roadmap to Health and Wealth SM. I’m your host, Al Waller. With us is Catherine Collinson, CEO and president of nonprofit Transamerica Institute®. Today, Catherine will be sharing new ways and terminology to describe how people are retiring.
Before we get started – a reminder that we would love to hear from you and learn what topics you would like us to cover. Please drop me or Catherine a note at [email protected].
Catherine, could you describe some of the trends you’ve seen in your research related to this change in the notion of retirement?
Catherine Collinson: Absolutely, Al, and to your point retirement is indeed changing – and it's changing a lot. Over the course of the years that we've been doing research, we've seen these gradual changes, and I can share with you where we are today.
In our most recent survey of workers, we found that almost half (49 percent) expect to retire after age 65 or just do not plan to retire. On top of that, 57 percent, that's almost 6 in 10, plan to continue working at least part-time in retirement.
Work in retirement has also appeared in some of our other survey questions in places that we never expected. For example, we ask about retirement dreams. And when we think of retirement dreams, people cite time with family and friends, travel, hobbies – but 36 percent said they “dream” of doing some form of paid work in retirement. That's huge.
Another thing, we see a lot of workers citing income from work as a source of their retirement income. We think of the “three-legged stool of retirement”, that being Social Security benefits, employer benefits, and personal savings. Well, workers have added a fourth leg to that stool, and it's called, working.
Al Waller: I think those findings that you just referenced clearly illustrate this new idea of what retirement looks like, and let's face it, the landscape has been changing for more than a few years. That said, I'm surprised that so many workers plan to continue working in retirement. So, then what does this trend look like in the workplace?
Catherine Collinson: Well, as you mentioned early on in your intro, retirement is no longer this fixed moment in time where you are working full blast one day and then never again the next. Many workers view it very personally and are looking for a flexible transition that aligns with their values, their needs, and their priorities. As we will get into, there are some new broad terms for these types of transitions and how employers are gradually starting to implement new business practices.
So, today we're going to talk about 3 new vocabulary words for business practices that are emerging to support this phased transition to retirement. The 3 vocabulary words are phased retirement, flexible retirement, and encore careers.
Al Waller: As you know, I had a career which was focused in employment and employer relations. So, I'm really looking forward to learning more about this, Catherine.
Why don't we begin with phased retirement – what can you tell us about that?
Catherine Collinson: Phased retirement refers to a formal program offered by an employer that has well-defined parameters and requirements, that are based on an employer’s objectives, taking into account their employee’s needs. The federal government is well known for its phased retirement program. It allows federal employees to switch from full-time to part-time schedules and at the same time start to receive their retirement benefits to help offset the reduction in pay that is associated with cutting back their work hours.
Phased retirement programs like this are not yet widespread. Our most recent survey of employers finds that only 31 percent offers formal phased retirement with specific perimeters and requirements.
Al Waller: Hats off to the Feds. I'm pleasantly surprised because these sound like fairly thoughtful and forward-thinking models that they're using. Now, I think I heard you say that these are formal programs, and if so, I'm assuming flexible retirement programs are less formal, right? And if that's the case, how do they work?
Catherine Collinson: Yes, flexible retirement offerings are just that – they are flexible. The term generally refers to a broad range of employer business practices that can help workers as they transition. To your point, they are less formal in nature and often offered on an ad-hoc or case-by-case basis.
Al Waller: I see. Could you give us some examples of these types of practices?
Catherine Collinson: Sure, one example is offering flexible work hours and flexible work schedules, which could relate to a reduction in hours – which would free up more time for personal pursuits. Other examples are the ability to shift from full-time to part-time or to even take on a role that is less stressful or demanding.
Let me give you a couple of examples. Years ago, a very good friend of mine who was nearing retirement was not ready to retire yet. She had a big job and was working full blast, all the time, and her father came down with Alzheimer’s. His care needs grew and grew. She was able to work out a transition to retirement with her employer where she kept working, but she was able to switch to part time so that she could take care of her father.
Another example is someone who may have developed a health condition that limits their ability to work full time. They want and need to keep working and their doctor even thinks it is a good idea to keep working, but just not at the same pace. So, this person could transition, which is a flexible transition, by switching from full time to part time or reducing their hours.
Al Waller: Well, this all sounds great and really encouraging to hear about – how some workers are able to have more flexible schedules. But something tells me that not all workers have access to these options. To what extent does your research indicate that employers are offering these kinds of opportunities?
Catherine Collinson: Well, Al, your hunch is correct. Our research finds that employers are offering these, and it's more prevalent than the formal phase retirement programs that we just spoke of. However, they're still not yet widespread. So, let me share some data or some factoids with you.
Forty-four percent of employers say they accommodate flexible work schedules and arrangements. Thirty-six percent enable employees to shift from full-time to part-time. And only 34 percent offer the ability to take on jobs that are less stressful or demanding.
Al Waller: Well, I think it's going to be really interesting to see if down the road employers eventually expand these opportunities to meet their employees’ desires. Now, the third option you referenced was encore careers. Could you walk us through what those look like?
Catherine Collinson: According to encore.org, “an encore career is continued work in the second half of life that combines social impact, purpose, and often, continued income. An encore can be paid or volunteer.” And part of their definition that I really like is that “it’s much more about life stage than age.”
And, Al, if you are willing, I'd love to put you on the spot because you are an awesome example of someone with an encore career.
Al Waller: Sure, Catherine, I'd be glad to – and as I've referenced at the top, I enjoyed a career within human resources management and consulting. As I went about scaling back and contemplating my next chapter, I knew I wasn't destined to sit in the park feeding the pigeons or working on my golf handicap every day. So, I started to think about what kind of a gig I could get my head around that would be fun, stimulating, but also fulfilling at the same time.
With that, I began the process of exploring a passion I've always had for radio broadcasting, which I had done back in my college days. It had always sort of been in the back of my mind down the road. Lo and behold, my journey – if you will – led me to WYPR and this show. And I guess you could say it was kismet because I've had the greatest pleasure of working with you, here on ClearPath – going strong for…what – four plus years and counting.
Catherine Collinson: And counting. And we are so grateful to have you as part of the show – an awesome encore career – and for us, it's just been a true gift. We just thoroughly appreciate everything that you do for us.
Al Waller: Mutual admiration society, Catherine! I really do love it and as a wise and successful executive once told me, he said “if you love what you do, you'll never work a day in your life.” Boy, isn't that the truth.
What tips do you have for people who are thinking about transitioning through a phased flexible retirement or an encore career?
Catherine Collinson: I have three tips to share.
The first is do your homework. If you are considering transitioning to retirement in the near future or maybe in the next few years, start doing your homework. Quietly research what your employer offers, and be on the lookout for others who may have been successful in transitioning and learn how they did it.
One thing we all should be really careful about though, is you don't want to tip your hand prematurely with your employer. If you are thinking about retiring years from now and start asking questions, they may think that you're going to retire right away – once that genie is out of the bottle, it's really hard to put back in. I recommend doing your homework, but just be really discreet about it – just to know what your options are.
The second tip is to consider the financial implications of your transition. For example, if you are looking to switch from full time to part time, will you still be eligible for your employee benefits? In what other ways may you be financially impacted that you have not already thought about? Then of course, it is also important to crunch the numbers to make sure that you can actually afford to give up the pay that's associated with transitioning from full-time to part-time.
My third tip – and for me this is the most exciting tip – is to find a “retirement mentor”, a “transition mentor”, or multiple mentors. Be on the lookout for people who have already done this and learn their stories, what worked well for them, and any pitfalls they may have encountered along the way.
Al Waller: Well, to piggyback off of your time-honored advice, Catherine, doing your homework really cannot be overstated. I think they're somewhat similar in nature, but the ones that I considered… First, my wife and I had always been pretty prudent with saving and investing, but we really needed to make sure we took a good honest look at the numbers to make sure that they worked, enabling us to live comfortably, which we did by sitting down and meeting with a financial planner. I mean, you can't take it with you, but you want to have enough to get there, especially given the average life expectancy is increased significantly with more and more living into their 90’s. Nobody wants to find themselves upside down financially in their golden years.
Second, we made sure our health care coverage was addressed because when you leave the subsidized coverage of your employer, it's a whole new ballgame and to that end, we sat in on some presentations offered by my wife's employer that gave us both a much clearer understanding of what to expect regarding benefits like Social Security, Medicare, etc. Bottom line, educating yourself is truly key.
And finally, if you have this idea of an encore career or setting up your own business or whatever your passion might be, I cannot stress the importance of networking – and sooner than later. In my case, through a volunteer program that I was involved with, I was able to meet and get a foot in the door with a key decision maker at the radio station and the rest, as they say, is history. Well, Catherine, looks like that is all we have time for today.
I’d like to remind everyone of our recent podcasts on the Workforce Emerging from the Pandemic, and Unretirement: Retirees Returning to Work.
If you have ideas for future episodes, comments, or feedback, please email me or Catherine at [email protected]. Don’t forget to subscribe to our podcast so you don’t miss upcoming episodes.
Until the next time, I’m your host Al Waller. Stay safe, be well and thanks for listening.
ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about health and wellness, employment, financial literacy, longevity, and retirement. You can find our weekly podcast on WYPR’s website and mobile app, wherever you get your podcasts, and at transamericainstitute.org/podcast.
ClearPath – Your Roadmap to Health & Wealth is produced by the Transamerica Institute with assistance from WYPR.
The information provided here is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance.
