The Impact of a New Phased Retirement Option on Faculty Retirement Decisions

Abstract

Life-cycle theory suggests that workers would prefer to gradually enter retirement from their career jobs. Using data from 15 campuses of the University of North Carolina system, this study provides a first look at the effects of the introduction of a phased retirement program on faculty retirement decisions. Our analysis indicates that most of the faculty members choosing phased retirement would have likely remained full-time at their universities had the phased retirement option not been available.

Do European employers support later retirement?

“…Experiences in various countries suggest that part-time retirement schemes trigger only those workers who intended to keep on working to reduce their working time, whereas it does not affect the intentions of workers who wanted to retire fully from the labour force. On aggregate, part-time retirement schemes have trimmed the number of full-time workers instead of full-time pensioners (Ghent et al, 2001;Guillemard, 1999). To shed some light on the issue of part-time retirement we first asked employers about facilities for part-time retirement.…”

Gradual Retirement: Preferences and Limitations

“…Partial retirement typically also involves a transition to a job with a lower wage rate and often has no pension coverage (Gordon and Blinder 1980;Gustman and Steinmeier 1982;Ghent and Clark 2001). Quinn (1999)'s sample of US workers aged 51-65 in 1992-1996 reported a range of wage rates from $ 5 to $10 for 60% of the bridge jobs, but only for 33% of the career jobs.…”

“…Gustman and Steinmeier (1984b) already noted that phased retirement would be discouraged if earnings in a year in which the individual works parttime would be counted in determining the pension or social security benefit. A specific financial incentive that makes gradual retirement less attractive is an earnings test on old-age social security benefits that taxes away most of after-tax earnings in a part-time job (cf., e.g., Zweimüller 1993;Ghent and Clark 2001). For example, the US old-age social security benefits that people can claim between age 62 and the normal retirement age are reduced by 50% for every dollar of earnings above a given threshold, typically reducing the marginal net wage rate of working part-time by the same 50%.…”

“…Employers can use partial and phased retirement as a means to reduce adjustment costs (Ghent and Clark 2001) and to increase productivity and reduce absenteeism by increasing job satisfaction (RedayMulvey 2000). For firms with their own occupational pension fund, phased retirement may lead to longer contribution periods if workers continue contributing during phased retirement, and to lower average benefits if workers in phased retirement receive partial pensions.…”

The Effect of Partial Retirement on Labor Supply, Public Balances and the Income Distribution: Evidence from a Structural Analysis

“…if employers use partial retirement to maintain their human capital by keeping experienced employees longer in their firms in order to teach newly hired workers (see e.g. Ghent et al, 2001;Munzenmaier and Paciero, 2002). It can also yield negative effects if partial retirement is used as a tool to renew the working force in firms by reducing work hours of elderly employees and practically sending them off to retirement earlier.…”