Designing phased retirement programs that work

Phased retirement programs have become a popular way to foster an age-friendly culture that supports both older employees and the companies that value their depth of knowledge and expertise they bring to work. Unlike traditional retirement, this creative approach empowers employees to retire on their own terms—by reducing work hours over time and easing into a pivotal life change.

A phased retirement can give employees more time to potentially build their savings and fuel the retirement lifestyle they envision and to savor the purpose and structure their job provides before transitioning to full-time retirement. And companies appreciate the added stability, time management and potential budgetary gains of gradually shifting older workers into retirement.

How it works

There are a variety of strategies for designing phased retirement plans that can include reduced work hours, compressed work weeks, flexible scheduling or a combination of these. Companies may choose to restructure an existing full-time role into a shared part-time role with another employee. Phased retirees can help expand mentorship programs, offering valuable insights to younger or less experienced employees. Some employers prefer to limit a job to specific tasks with fewer responsibilities that suit the employee’s expertise, while others leverage their institutional knowledge with high-level temporary or consultative project roles.

The most successful phased retirement plans meet the unique needs of the company and its intergenerational workforce.

Benefits to employees

Maintains an income stream and the option to continue contributing to their retirement plan.
Continues access to medical insurance coverage without dipping into health care savings for retirement.
Enjoys the social connection and engagement of longstanding relationships at work.
Gradually frees up time to pursue other interests and ease the transition into full-time retirement.
Stays motivated and intellectually active with a sense of purpose and daily structure.

More than 1 in 3 workers do not expect to retire until age 66 or older—or ever retire.¹

Benefits to employers

Assists with the company’s need for continuity in the transfer of knowledge and skills to other workers.
Affords added time to identify potential successors for key roles and to actively train them during the phased retirement period.
Helps minimize process and operational impacts and potentially reduce labor costs by moving older employees to part-time roles.
Enhances employee morale and job satisfaction by underscoring the employer’s commitment to a culture of support for all.

Key takeaways

Reach out to your Bank of America representative to discuss how phased retirement programs interact with the benefit plans that we support.
Openly discuss all phased-retirement options with employees nearing retirement age, providing information about their eligibility and potential benefits and highlighting their value to the company.
Clearly communicate expectations for employees during the phased-retirement period, including performance standards and responsibilities.
Formalize mentorship programs designed specifically for phased retirees to pass down skills and insights to younger workers.

¹ 2024 Retirement Confidence Survey: Results and Insights from EBRI and Greenwald Research.