Think it’s time to retire? Not so fast

Eve Tahmincioglu • Profile • E-mail

John Sayles has worked for Stanley Consultants in Muscatine, Iowa, for more than 40 years doing engineering and environmental planning for communities but at age 73 he’s still not ready to clean out his desk and head for the golf course.

“I’m having too much fun,” he says about his decision not to retire at 65.

Sayles was given the option by his company to phase into his retirement when he was ready, and that meant going to a four-day week at age 69 in 2003, then scaling back his hours in subsequent years. He now works one day a week on average, but often puts in 40-hour workweeks depending on the project.

“I would recommend it to anybody,” says Sayles about his non-retirement plan. “It keeps your hands in it, keeps you young and moving.”

It appears more and more of the 60-plus crowd wants to keep moving as well, with 25 percent of this population working in 2006, up from 20 percent just 10 years ago, according to the  Bureau of Labor Statistics. When you break down the numbers, 52.5 percent of 60-to-65 year old workers were still employed last year, up from 45.8 percent in 1996; and individuals aged 65 and older are also staying employed longer, with about 15.4 percent in the labor force in 2006, a rise from 12.1 percent in 1996.

For much of the 20th century there was a trend towards early retirement among older workers, according to a March 2007 report for the Center for Retirement Research at Boston College written by Leora Friedberg, an assistant professor of economics at the University of Virginia.

But Friedberg points out a change: “The trend towards earlier retirement has not just leveled off, but has apparently reversed.” She attributes the reversal to a number of factors, including everything from rising costs of health and long-term care to general economic uncertainty surrounding the retirement years for seniors. And people are living longer, healthier lives, making working into the late 60s and 70s a more realistic option for many.

But not surprisingly, it may all come down to the money. And that’s why a new pension law that kicked in this year may add more fuel to the phased-retirement fire.

In the past, many individuals opted to retire even though they weren’t ready because they wanted to begin receiving pension benefits from their employers, which in many cases started only when the worker hit a certain age, typically 62 to 65, and couldn’t be paid out unless the employee left their job. But the newly minted Pension Protection Act allows older workers the option of staying on the books while also getting their pension checks.

“Even though IRS regulations for implementing the Pension Protection Act have yet to be defined, the new law helps to make phased retirement a viable option for employers who want to capitalize on mature talent,” according to a report released last month by The Conference Board, a business research organization. “As the U.S. work force grows older, and life expectancy continues to rise, the play book for retirement is being rewritten.”

Phased retirement can be anything from working full-time to full retirement, but few companies have implemented formalized programs for their retirees for fear of breaking existing pension laws. “Up until now,” the report adds, “employers were not allowed to pay retirement benefits from such a plan—as either a pension or lump-sum payment—until an employee had terminated employment or had reached the plan’s normal retirement age.”    

Kyle Brown, retirement counsel for consulting firm Watson Wyatt Worldwide, says companies have yet to jump on the bandwagon and begin developing phased retirement programs such as the formal one offered at Stanley Consultants, but he expects to see many firms come on board once the new law is clarified.

Besides the law, he says, companies will be motivated to start their own phased retirement plans because of basic economics. “The percentage of workers over 55 in the next five to 10 years is going to increase dramatically. If employers ignore older workers, they do so at their peril.”

Indeed, Stanley Consultants sees value in its older workers, says Gregs Thomopulos, president and CEO of the firm, because there’s a dearth of experienced engineers in his industry. “If we have people that are in good health and they are willing to work, we try to accommodate their needs,” he explains.

About 75 percent of Stanley Consultants retirees take advantage of the phased retirement program, which is tailored to each individual employee.

“In many cases, the member will begin to work reduced hours for a period of time prior to retirement, then continue to work in some capacity following the retirement date, often for many years,” says Mary Jo Finchum, a spokeswoman for the firm.  “The standing joke is that the company will host the member's retirement party on Friday, only for the member to return to work in a new capacity the following Monday.”

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