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.
- 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?
- 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?
- 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.
- 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.
The author developed the free annuity supplement software, which can be downloaded from: https://www.mediafire.com/?yzqd2d3alh31zix