Money & Policy

‘Partial Retirement’ Is On the Rise

Why more Americans are opting for 'bridge' jobs after leaving full-time positions

(This article appeared previously on MarketWatch.com.)

Partial retirement wasn’t all that common in 1960. More than 50 years later, a substantial percentage of people now hold a “bridge” job before they stop working for good.

In fact, 20 percent of workers between the ages of 65 and 67 — and analyzed in a recent University of Michigan Retirement Research Center study — are partially retired, up from just 5 to 10 percent in 1960.

Partial Retirement Is Starting Earlier

More workers are slowing down earlier, too: 15 percent of those 60 to 62 years old are partially retired. According to the University of Michigan report, in 1960, partial retirement among this younger group was “virtually non-existent.”

(MORE: Surprising Reasons Boomers are Working Longer)

The study defines partial retirement as a job in which income doesn’t exceed 50 percent of the maximum annual earnings a person made in his lifetime.
In the analysis, researchers looked at lifetime earnings histories of white males between 1960 and 2010, categorizing the status of workers as full-time, partially retired or fully retired. (The study was restricted to white males as an attempt to control for changes in the racial and gender composition of the work force over these years.) Researchers also only considered people with at least five years of continuous earnings of more than $5,000 (in 1984 dollars), to exclude those with irregular working histories.
“It is becoming increasingly common for older workers to exit a career job prior to retirement and continue in a lower-paying ‘bridge’ job,” researchers wrote in a brief.

(MORE: Programs and Tips to Help the Long-Term Unemployed)

One Reason: Higher Unemployment
A big reason for the increase in partial retirement: higher unemployment.
People between age 63 and 67 are especially sensitive to increases in the national unemployment rate, according to the report. For every 1 percent rise in unemployment, there’s a 1 percent drop in full employment for those between the ages of 55 and 75. And there’s as much as a 2 percent drop in full employment for those between 63 and 67.

(MORE: Semi-Retirement Jobs With Great Benefits)

More people are also apt to exit the labor force during times of high inflation, possibly because wages don’t keep up with the increased cost of goods and services, according to the study.

But these workers may not be able to afford full retirement, or they may want to continue working to stay active. As a result, they accept jobs for lesser pay.
Amy Hoak is a MarketWatch editor and columnist based in Chicago. Follow her on Twitter @amyhoak.

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