A Bridge to Retirement Security

For many older workers, especially those from lower-income backgrounds, flexible work arrangements offer a crucial pathway to financial stability as they transition into retirement. A study by the Center for Retirement Research at Boston College found that access to flexible work arrangements increased the likelihood of older workers remaining in the labor force by 9.8 percentage points. This allows employers to retain experienced talent longer, reducing turnover costs and preserving institutional knowledge.

These options are particularly valuable for those facing economic pressures or health challenges in their later years, and those with caregiving responsibilities.

Benefits of Flexible Work in Retirement Planning

• Phased Retirement

Flexible arrangements allow for a gradual transition into retirement, which is particularly crucial for workers from lower-income backgrounds who may need to continue working for financial stability. While some older workers choose to work part-time for enjoyment, many others do so out of necessity.  This phased retirement approach serves multiple purposes: it provides a steady income stream to supplement retirement benefits for those with limited savings, helps ease the psychological transition from full-time work to complete retirement, and allows individuals to gradually adapt to a new lifestyle

This approach can help ease the psychological and financial adjustment to full retirement. Additionally, the AARP reported that two-thirds of older workers continue to work because it makes them feel useful, and over 75% enjoy their jobs, underscoring the importance of work satisfaction in retirement decisions. Additionally, maintaining part-time employment can help older workers retain access to employer-sponsored health insurance before becoming eligible for Medicare.

• Supplemental Income

Part-time and flexible jobs provide vital additional income for retirees. A survey by Indeed Flex found that 45% of workers aged 55 and older pursue flexible work primarily for extra retirement income. Supplemental earnings can help cover essential expenses and reduce the strain on retirement savings. This trend aligns with the broader retirement savings crisis, where nearly half of Americans 55 and older have no retirement savings, according to a report released by Senator Bernie Sanders.

Supplemental earnings can help cover essential expenses and reduce the strain on retirement savings, which is crucial given that 52% of Americans 65 and older are living on less than $30,000 annually. This need for additional income is further highlighted by Prudential Financial’s 2024 Pulse of the American Retiree Survey, which found that 55-year-old Americans are far less financially secure than older generations and face significant mental and emotional strain as they approach retirement.

As the retirement landscape continues to evolve, with the potential depletion of Social Security trust funds and the decline of defined benefit pension plans, the role of supplemental income through flexible work becomes increasingly critical for ensuring financial stability in retirement.

Employers can implement a variety of flexible work options to support older workers and ease the transition to retirement:

Flextime: This allows employees to adjust their start and end times while maintaining full-time hours. For older workers, this can accommodate medical appointments or caregiving responsibilities.

Compressed workweeks: Employees work full-time hours in fewer days, such as four 10-hour days instead of five 8-hour days. This can provide longer periods of rest for older workers managing health concerns.

Job sharing: Two part-time employees share the responsibilities of one full-time position. This arrangement can be particularly beneficial for older workers looking to reduce hours while maintaining their professional roles.

Phased retirement: Employees gradually reduce their hours over time, allowing for a smoother transition into full retirement. A study by the Center for Retirement Research at Boston College found that access to flexible work arrangements increased the likelihood of older workers remaining in the labor force by 9.8 percentage points.

Remote or hybrid work: This option can reduce commuting stress and accommodate mobility issues for some older workers.

Part-time work: Reducing hours while maintaining employment can help older workers transition gradually into retirement or manage health concerns. This is the most common form of flexible working amongst older workers.

Seasonal or project-based work: Some retirees opt for temporary or seasonal positions, allowing them to work intensively for periods and then take extended time off.

Consulting or freelancing: Leveraging their years of experience, many retirees transition into consulting roles or freelance work, offering flexibility and the ability to control their workload.

These flexible arrangements are particularly crucial for older women and workers of color, who often face additional economic challenges in retirement. Women, on average, have lower retirement savings due to career interruptions and wage gaps. The U.S. Census Bureau’s 2019 data shows that women earned 82 cents for every dollar earned by men. In addition, women disproportionately bear the burden of caregiving responsibilities, which can significantly impact their careers and financial security. According to AARP, about 61% of family caregivers are women. This imbalance in caregiving duties often leads to women facing greater challenges in balancing work and family responsibilities. For workers of color, who on average have lower retirement savings, flexible work can provide essential income to support a more secure retirement.

Implementing these flexible options can help organizations retain valuable experience and knowledge while supporting older workers’ financial stability and well-being. However, challenges remain, including maintaining health insurance coverage for those not yet eligible for Medicare and navigating potential age discrimination. Nearly one in six adults currently working or looking for work (14%) report that they were not hired for a job they applied for within the past two years because of their age.

As the workforce continues to age, it’s imperative that organizations and policymakers prioritize these flexible work options to support the economic security of all older workers in their retirement years. By embracing flexibility in various forms, employers can attract and retain older workers while addressing the broader retirement savings crisis and promoting economic stability for a significant portion of the workforce.