Phased retirement -- it occurs in other countries, could it work here?
The Government Accounting Office did a study on phased retirement to see what the U.S. might learn from other countries.
As workers age and many retire earlier than they might like, thanks to health or other issues, some point out that if they could ease into retirement it would be more beneficial than either sticking it out at work or having to leave the job altogether.
Experts also point out that when people fully retire before they’re really ready to go, it can leave them short of cash during retirement as well as leaving the labor market short of experienced workers and expertise.
With those and other issues in mind, the Government Accounting Office did a study on phased retirement in other countries to see what the U.S. might learn from others’ experiences.
While the study made no recommendations based on what it found, it did offer specifics about what some other countries are doing to deal with the problem.
The GAO found 17 countries with aging populations and national pension systems similar to Social Security. It focused on four of them—Canada, Germany, Sweden and the U.K.— that offer various strategies nationally to encourage phased retirement. But the specific programs differed on design and sources of supplemental income for participants.
In the beginning, some countries adopted such policies to encourage older people to begin to leave the workforce, thus making room for younger workers.
That reason has now changed due to demographics, so countries are aiming to do the opposite—encourage older people to remain so that knowledge and skills can be passed along to the next generation of workers as well as increasing older workers’ participation in the labor force.
While in the U.S. employers deal with employee-directed retirement plans and many employees are not covered by collective bargaining, some phased retirement plans in use in other countries allow access to employer-sponsored or national pension benefits while working part time. For example, in the U.K., workers are allowed part of their pension money without it being taxed. And one U.K. employer also reported allowing concurrent contributions to those plans.
The GAO was told by U.S. employers that offering phased retirement to specific groups of workers could run afoul of employment discrimination laws.
The report notes that a union representative in Germany told of an agreement in which employers can restrict or cap participation, such as at 3 percent of the workforce, to manage the number of workers in the program.
Another German strategy involves national policies that make it easier for workers to cut their hours and get a portion of their pension benefits while still being able to contribute to that plan since they’re still working. One national program uses tax preferences.
Then there’s Sweden, which launched a policy in 2010 that allows partial retirement and access to partial pension benefits to encourage workers to stay in the labor force longer.
The GAO report notes that their investigation found it can be costly to design and implement phased retirement programs. Complicating matters for a U.S. program would be the fact that health insurance is provided through the employer, not nationally as in other countries. Additionally phased retirement programs could run afoul of U.S. employment regulations regarding discrimination, and those issues would also have to be addressed.
READ MORE:
Workplace revolution will be led by older workers
As the U.S. workforce gets older, Medicare assistance is a must-have