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Living Stronger, Earning Longer: Redefining Retirement in the 21st Century

Testimony Before the Senate Special Committee on Aging

Other efforts have centered on phased retirement. AARP believes that the goal of a phased retirement program is to encourage older employees nearing retirement to remain contributing members of the labor force beyond the time they otherwise plan to work. Phased retirement programs could ease the projected labor shortage and boost the economy through longer workforce participation by experienced employees. This approach could also expand work options for older workers, as well as allow them to ease into retirement before completely exiting the labor force. Employers would benefit from phased retirement programs that help retain hard-to-replace, experienced workers, especially if anticipated labor shortages materialize.

As part of its work on phased retirement, AARP recently commented on proposed regulations by the Internal Revenue Service that would allow traditional defined benefit pensions to pay partial benefits to employees eligible for retirement who reduce the number of hours on the job by at least 20 percent. If made final, the proposed regulations would represent an important step toward allowing one type of phased retirement - a cutback on work and partial pension payments - while protecting retirement income security and the integrity of the private pension system.

In addition to commenting on the proposed regulations, AARP released a survey, "Attitudes of Individuals 50 and Older Toward Phased Retirement" in March. The survey was designed to gauge reactions to the concept of phased retirement as well as determine the extent to which it would encourage workers near traditional retirement age to remain in the workforce longer than they otherwise planned. It includes respondents who are currently working as well as those who are retired.

Although only about one in five (19%) respondents had heard of the term "phased retirement" before the survey, nearly two in five (38%) said they would be interested in participating in such program once they learn about it. Of workers who specifically expressed interest in phased retirement, 78% expect that the availability of such a plan would encourage them to work past their expected retirement age. Nearly half (46%) of workers interested in phased retirement said that they would like to start participation between the ages of 60 and 64. When workers who expressed interest in phased retirement were asked how many fewer hours they would prefer to work, 53% would like to reduce their weekly schedule by at least 12 hours and 39% would like to reduce it by 10 or fewer hours.

AARP supports the development and implementation of work options, including phased retirement programs, that would expand employment opportunities for older men and women who want to work. AARP believes that barriers to the acceptance and implementation of phased retirement programs should be eliminated. However, phased retirement programs must be designed to protect workers' benefits and preserve the long-term retirement security of workers who choose this option while recognizing the legitimate needs of employers.

II. Programs

Some employers are innovative in addressing the challenges and opportunities of an aging workforce. By implementing programs to attract and retain older workers today, companies also position themselves to respond to future needs.

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