Do the Downshift to Survive Your Retirement Years

Last Updated Apr 6, 2010 11:04 AM EDT

The past two years of economic turbulence have scrambled the nest eggs of many Americans nearing retirement. Many who thought they'd saved enough to retire soon no longer have that same sense of security. And even without the economic downturn, the majority of workers aged 55 and older don't have the financial resources needed for a traditional retirement. (See my prior post, Can't Retire Yet? Don't Despair). Clearly, working longer might be the only solution for many Americans. But the thought of putting in a decade or two more of full-time work might be depressing, to say the least. Are there any other options?

And what about those workers who've reached a point in their lives where they yearn for more work-life balance? They have valuable knowledge and contacts, and are still engaged and productive--and will be for years to come. But they're not ready for retirement, even if they could afford it. Are there opportunities for them here?

Various surveys and studies, such as EBRI's 2010 Retirement Confidence Survey and University of Michigan's Health and Retirement Study, show that the majority of mature employees have an interest in continuing to work in their retirement years, for a variety of good reasons. They need the money, they need health insurance, they want to remain engaged, they want to contribute to society, and so on. But what if their employers don't want these older workers full time? Are there still ways they can remain employed?

You bet! For any of the above reasons, I advocate that you consider a much more gradual transition than the traditional retirement, which is often very abrupt. What I'm suggesting is called downshifting, and it's different from phased retirement, which implies a few years of part-time work before full-time retirement. Downshifting is about creating an extended period in your life where you and your employer benefit from your substantial work and life experience at an acceptable cost, and you get more work-life balance. Downshifting is about reducing your hours and restructuring your work, to do just the work that you like and you're good at.

Doing the downshift isn't a one-size-fits-all exercise. It can take the form of formal part-time work, seasonal work, project work, or job-sharing. You can take unpaid leave during slow times. And unfortunately, the economic downturn has given us a new term for downshifting: furloughs.

Here's another very good reason to consider downshifting. If you're in your fifties or sixties, you could be alive for another 30 or 40 years. It takes a boatload of money to be fully retired for this long. Delaying full retirement for just a few years can make a significant difference in your financial security. It allows you to defer drawing down existing retirement resources to let those funds grow until they're really needed at full retirement. (A future post will do the math to show how this can work.)

Still not convinced to try downshifting? Some fascinating research suggests that people who work in their later years have lower death rates. My prior post, Does Working Longer Increase Your Lifespan?, explains this in more detail.

I'm in my late fifties, and I'm practicing what I preach. I've reduced my work hours, with a corresponding reduction in income, but I've also reduced my living expenses. I'm doing just the work that I like and am good at. Life is indeed very good, and I can see myself going on like this for many years to come, well into my sixties and even seventies. So why not consider doing the downshift with me?

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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