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Phased Retirement?

by Robert F. Benson |

The proposed phased retirement sounds good: work fewer days per week and get paid from two sources instead of one.  However, I have a few reservations.

  1. Employees nearing retirement eligibility typically have concerns about money.  Have I saved enough?  Will my “nest egg” retain its buying power, despite inflation, over a long period of time?  Am I certain I know what I am doing?  
  2. Phased retirement, by definition, involves a reduction in income.  This is just my opinion, but I believe employees nearing retirement are the last ones who would be interested in a reduction in pay.  More overtime?  Yes.  Cut my income?  Not so much – I’m trying to save for retirement!

    As long as the employee remains in phased retirement status – even if it is only one day per week – he cannot be replaced.  He is still on board, doing just 20% (or so) of what he used to do.  How much will managers like this?

  3. The Congressional Budget Office (CBO) has estimated passage of the phased retirement bill would result in decreased spending of $427 million and increased revenue of $24 million, over the period 2013-2022.  That’s nice, but where did these numbers come from?  Any estimate, in order to have credibility, must be based, somehow, on real numbers, not just guesses.
    • How many employees eligible for retirement would opt for this?
    • What salary levels would they be?
    • How many, at each salary level, would want 4 days per week?  How many for 3?  Anybody say 2?  Or maybe even 1 day per week?
    • How long would they stay in this “neither fish nor fowl” status?
    • What percent of high-three would be involved?  Variability?
    • What, exactly, would happen to their full retirement annuity?  Would it increase?  Would it be debited by the part-time annuity?  Please explain.
  4. Then there’s always our friends at the Office of Personnel Management (OPM).  They have been struggling – unsuccessfully – for years to manage their retirement calculation workload.  With all its administrative requirements and complications, phased retirements would just make matters worse.

Is there an actuary out there?  I would like to hear what a disinterested actuary has to say about putting money into the retirement fund for part-time work, while simultaneously taking money out of the fund, for part-time retirement, both for the same employee.  It looks to me like the retirement fund is being treated as a piggy bank.

I don’t know.  CBO is supposed to be non-partisan, but I believe they are trying very hard to promote a program that is highly questionable.

My website is here: fedbens.us

© 2014 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

About the Author

Robert F. Benson

Before his retirement in 2010, Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University and developed the software at fedbens.us.

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April 24, 2014

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