After a lifetime of dedication, American workers have earned the chance to relax and enjoy retirement. Yet, many are opting for a phased approach to retirement, rather than a complete exit from the workforce, a shift from past generations.
A recent survey by WTW, conducted from January to March 2024, revealed that one-third of workers aged 50 and older—spanning Baby Boomers and Generation X—are either currently transitioning into retirement (15 percent) by cutting back their hours, or they have shown interest in doing so (19 percent).
Among those making this transition, 61 percent noted they are working fewer hours, while 41 percent have taken on less responsibility. Some are even looking to change roles or modify their work arrangements, such as adjusting their remote work status.
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What’s Driving the Change in Retirement Trends?
Respondents highlighted key factors shaping their retirement plans, with financial security leading the way (76 percent), followed by health considerations (50 percent) and a desire for more family time, travel, and relaxation (45 percent).
Unlike previous generations who found retirement easier, many current workers are transitioning out of “economic necessity.” Approximately 9 percent admitted they aren’t saving enough for retirement, while just over half (52 percent) feel they are on track financially.
The way retirement savings are managed has dramatically evolved over the years. In 1975, there were approximately 27.2 million participants in private-sector defined-benefit pension plans, promising set monthly payments upon retirement. By 2020, that number had dropped to about 12 million.
In contrast, participation in defined-contribution pensions, like 401(k)s, surged from 1.2 million in 1975 to 85.5 million in 2019.
In addition, increased life expectancy means workers need to save more. In 2020, the average life expectancy was 78.8 years, a notable rise from past decades.
The Perks of Phased Retirement
While many workers phase into retirement for financial reasons, this transition also reflects changing attitudes among older generations. Many now prioritize a “work to live” mindset rather than “living to work,” focusing on flexibility and balance.
Moreover, for many who ease into their retirement, part-time work can offer a sense of purpose and fulfillment, alongside supplemental income.
As a result of fewer physical labor jobs, a cultural shift towards valuing quality of life is becoming more prominent. Between 1979 and 2019, manufacturing jobs—often tied to rigid hours—decreased by more than a third.
Looking Ahead: Future Trends
Experts predict that the trend of phased retirement will continue to grow. Younger generations are likely to face similar financial pressures, suggesting that this practice will become even more common.
As Ambrose noted, “With rising life expectancies and evolving work environments, such as the gig economy and remote work, we can expect to see more individuals opting for phased retirements.”
Chin concurs, anticipating that concerns over pension sustainability will further contribute to this trend.