Leverage a Looming Talent Shortage to your Retirement Advantage

This no doubt will sound a bit counterintuitive with the unemployment rate at a 25-year high, but older workers will likely face a friendlier work environment over the next few decades. At play is pure demographics: plenty of Boomers retiring and a dearth of younger workers to absorb all the jobs.

After growing at a 2.6 percent annual rate in the 1970s, the U.S. labor force slowed to a 1.3 percent annual growth rate from 1990-2000. Projections are that over the next two decades, the average annual rate (in each decade) will be below 0.50 percent.

Now of course, immigration and global outsourcing could fill in plenty of that gap. But employers seem to be slowly catching onto the idea that retaining talented experienced workers might actually be a smart H.R. initiative.

PHASED RETIREMENT GETS PHASED IN Phased retirement is an oft-discussed tactic. Employers offer older employees a reduced workload (at reduced pay) in exchange for more time off. Both sides are seen to benefit: the employer keeps that wizened institutional knowledge working for the firm, and older workers get a more flexible schedule that makes it more enticing to stay on the job a bit longer. But the reality to date, is that while employers say they support the idea of phased retirement, very few have any formal policy in place. According to a 2008 Hewitt survey on Phased Retirement nearly half of employers say they offer some type of phased retirement to employees, but just 5 percent had actual formal policies in place.

But that may soon be changing. In the same survey, Hewitt reported that while just 21 percent of firms said adopting a formal phased retirement program was critical issue to them in 2008, 61 percent said they expect it to become a critical issue for them in the next five years.

That's some much-needed good news for the 60+ crowd looking to extend their work years a bit. But to snag a phased retirement deal requires working out a strategy today:

• Plan years (not months) ahead. It's not going to work to plop yourself down in you boss' office a few months ahead of when you want to go to a reduced schedule and announce your idea. This is a conversation that needs to start at least a few years earlier, to give your company time to figure out how it might work.

• Ease into a non-management job. A 2000 study of companies with phased-retirement programs reported that it was most often offered to non-management employees. That makes perfect sense. If you're only going to be in the office on a reduced schedule -- and your vacation time is going to double -- you're going to lack the face time often needed to be a successful manager. So look around a few years from your ideal phase-in date, and think about what non-management job you could do, and do well. If that requires some brush up on old skills-or more likely acquiring a few new ones-you need to get that training ahead of when you expect to make your pitch for phased retirement.

• Check the impact on your retirement accounts: If you happen to be among the few private sector workers with a defined benefit pension, make sure you understand the impact a reduced schedule might have on how your retirement benefits accrue in your final years. You also want to factor in whether your company will continue to match your 401(k) contributions given your reduced schedule. While you're at it, think how you can budget to keep your own contribution at the same level. If your salary declines during phased retirement, you would need to increase your contribution rate to maintain the same dollar investment you were making when you drew a higher salary.

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