Retirement News : Seniors : Reinventing Retirement

Reinventing Retirement

Date Added: 29-03-2005

Older Americans are reinventing retirement. As they do, they're prompting federal regulators and human resources departments to change the rules.

"Retirement used to be `all or nothing' - you were either retired or employed," said Dallas human resources consultant Barbara O'Neal. Now, "more people are trying some combination of retirement and work."

Many older workers don't want to work as many hours, but they still enjoy the challenge or need the income. So they're retiring in steps, collecting their pension from one company while getting a part-time or consulting job at another.

O'Neal calls it "retirement but with training wheels."

However, because of tax and pension laws, scaling back usually requires changing employers, even though many older workers would prefer to stay at the employer they know rather than re-enter the labor market.

"It's always easier to keep a job than to get a job," points out AARP senior policy adviser Sara Rix.

The idea of phased retirement is popular with employees, said Valerie Paganelli, a senior consultant with Watson Wyatt.

A survey by the human resources consulting company found that two-thirds of older workers wanted to scale back their hours before completely retiring. One-third also said they would postpone their full retirement if their employers offered a phased retirement option.

Federal rules changes could encourage that.

Human resources professionals call a proposal by the Internal Revenue Service a good first step to encouraging phased retirement.

Under the rule, workers 59 or older would be able to cut back hours and live off a combination of a reduced salary and a partial pension from the same employer.

Workers who scaled back to 20 hours a week, for example, could tap half their early-retirement pension benefits.

When the employees completely retired and began collecting their ultimate pension benefits, they wouldn't be penalized for the lower earnings of their last working years.

The programs would be voluntary for both employers and employees and cover traditional, defined-benefit pensions.

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