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Workers in the baby boom generation would delay normal retirement if they could ease into it, according to a new survey by Watson Wyatt Worldwide, Washington.

One out of three workers aged 50 and up said that they would continue working longer if their employer offered a phased retirement program, such as shorter work weeks or flexible hours.

But few employers have yet to set up formal or informal arrangements that would influence older workers to delay full retirement, Wyatt says.

The survey of 1,000 retirees and workers near retirement age found big changes in attitudes about withdrawing from the world of work.

Nearly 24% of workers over age 50 already are phasing into retirement in some way, Wyatt found.

But the firm also found a dramatic gap between what older workers would like and the opportunities employers provide. For example, most survey participants would like to work less hours late in their careers, but fewer than half of them expect their employer to let them.

Commenting on the survey findings, experts observe that people in phased retirement need financial advisors who take a well-rounded approach to their needs. Phased retirement can present an array of financial challenges, they note.

For instance, the Watson Wyatt survey found, many employers cut back or eliminate benefits for phased retirees, just as they do with any part-timer. More than half reduce or eliminate life insurance benefits, while a third cut disability insurance.

“One of the main things people in phased retirement worry about is how long are they going to have health insurance benefits,” says Michael T. Smith, president, CPS Horizon Financial Group, Hales Corner, Wis. “But they dont look beyond that. They forget about disability, adding contributions to their 401(k) or what life insurance they might have.

“Many times their main insurance policies may be purchased through their [employer] group,” observes Smith.

The advisor can help them find alternatives, Smith notes. For instance, a client who loses group disability insurance might find an individual policy too costly.

“So, they may take critical illness insurance instead,” Smith suggests.

Another essential the advisor can supply the client is a budget, Smith points out.

“One of their biggest concerns is outliving their money,” he says.

Boomers often find themselves in involuntary phased retirement, forced out of their career jobs before normal retirement age. They may take a new job, often with reduced hours, income and benefits, notes Kevin M. Fink, a certified financial planner with Cornerstone Financial Group, Houston.

“I tell them to protect assets theyve been acquiring, such as their 401(k),” Fink says.

Having adequate life insurance is also important, Fink adds. This assures that heirs will be taken care of and frees clients from concern about using other assets during their lifetime.

“A 401(k) is a terrible asset to pass to heirs” because of possible high taxes, he points out. “But permanent life insurance lets the client spend down that asset. Its a little harder [to pay premiums] once theyre in their mid-50s, but permanent life insurance is a critical component of their financial plan.”

In addition, Fink says, “one of their biggest exposures is a need for long term care insurance.”

A Wyatt researcher points out many phased retirees are on a solid financial footing.

“What was once a three-legged stool of individual retirement income [Social Security, savings and employer pension plans] is quickly becoming a four-legged stool, with income from wages constituting the fourth leg,” says Janemarie Mulvey, assistant director of Watson Wyatts research and information center and one of the studys authors.

Looking at income by reason to phase, and across all incomes, “we found some did it because they enjoyed it,” says Mulvey. “It was not necessarily low-income people who did it because they needed the money.”

Watson Wyatts survey found 57% of workers currently in phased retirement entered into the arrangement voluntarily. Of these voluntary phasers, 42% said they enjoyed their work, while 28% said they needed the money.

In addition, 32% had at one time retired completely from their career jobs but later re-entered the workforce. Unlike voluntary phasers, 40% of this group said they returned to work primarily because they need the income, while only 34% said they work because they enjoy it, Wyatt found.


Reproduced from National Underwriter Edition, April 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.