Winding Down Work, Winding Up Retirement

Typically, Europeans retire earlier than Americans do, and on a much larger percentage of their previous salaries — about 67 percent, according to the OECD. Indeed, their situation is so generous that it has become too costly even for the European welfare states, some of which must provide five or ten more years of retirement benefits for workers than we do, since their citizens retire earlier and die later. Moreover, in Europe, even more than in the United States, an ever-larger group of seniors means greater demands on a smaller population of younger workers. So efforts to reduce pensions and increase the retirement age are at the top of the conservative agenda in Europe and have been passed in Germany and the Netherlands, though not yet in France, where thousands filled the streets to protest a raise in the retirement age from sixty to sixty-two.

But in our view, an economy concerned with the greatest good over the longest run would consider more creative solutions to this dilemma. Surely, the most reasonable is phased retirement. Instead of having workers fully retire at sixty or sixty-five or seventy, we should encourage them to retire in stages, with a larger portion of their retirement benefits kicking in at each stage.

They might first reduce work by one day a week, then in a couple of years, by two days a week, and so forth. Or their vacations might be lengthened — to two months, four months, six months, and so on. With workers in all countries living longer and in many cases staying fit longer into their lives, there is no reason they should be completely retired so early. Initially, this might cause some workflow confusion, so it will require some advance planning, but many companies and universities have found ways to do this effectively.

Partial retirement allows workers to stay attached to what is meaningful in their jobs and to the co-workers who are often their best friends. It allows room to be opened for younger workers to enter the company and the opportunity for older workers to mentor them. It allows older workers to find more time for exercise at an age when they need it most and to make new friends and find new hobbies outside the workplace. It can reduce financial pressures on the retirement system, be it Social Security or other pensions.

It is not for everyone — some workers can't wait to leave their workplaces completely, especially those “used up” by hard labor. But such an idea has wide appeal, and many businesses and institutions such as universities already take advantage of it. Targeted government incentives, including changes in tax policy and Social Security take-up rules, could spur greater use of phased retirement.

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