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Journal of Nursing Administration:
doi: 10.1097/NNA.0b013e3181e93746

A Business Case for Phased Retirement: Will It Work for Nursing?

Hill, Karen S. DNP, RN, NEA-BC, FACHE

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Author Information

Author Affiliation: Vice President/Nurse Executive, Administration, Central Baptist Hospital, Lexington, Kentucky.

Corresponding author: Central Baptist Hospital, 1740 Nicholasville Rd, Lexington, KY 40503 (

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In the United States, the issue of aging workers in the nursing workforce is one of growing concern with greater than 33% of RNs older than 50 years. The implementation of creative strategies to offset the loss of nurses' experiential knowledge has the potential to improve patient care and reduce risk to patients. The author proposes a program of phased retirement as an innovative approach to the anticipated loss of nursing knowledge related to retirement of the nursing workforce. The business case for support for phased retirement is discussed.

Statistics profiling the aging of the general workforce are daunting. Twenty percent of the American workforce is expected to be 55 years or older by 2015.1 Between 1998 and 2006, the population of civilian workers 55 years or older increased by 49.9%, whereas those between the ages of 25 and 54 years increased by only 5.5%. In Profile of Older Americans: 2007,2 it is reported that persons 65 years or older have an average life expectancy of an additional 18.7 years: 20.0 years for women and 17.1 years for men. In 2000, there were 360 million women 60 years or older, and that number is predicted to grow to 1 billion by 2050.3 In 1980, only 26% of the US population was older than 50 years; by 2037, the number is expected to increase by 37%.4

Efforts to address the issue of the aging workforce are limited, although demographic data describing the population of aging individuals suggest the issue is crucial.5-7 Increasing sensitivity to the aging population coupled with related and unrelated threats of labor shortages makes the need to end policies and incentives supporting early exit from the workforce a social and economic imperative.7 In addition, there is evidence that some people do not want to retire at a predetermined age. A study conducted by Merrill Lynch8 polling 5,111 adults in the United States revealed that 55% of the respondents want to work in some capacity during their retirement years to stay mentally active. Adding additional years to employment would also ease the economic burden to society by providing supplemental income to the pension system from increased numbers of workers as well as increase the retirement income of the individual employee.9

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The exodus of baby boomers from the nursing workforce will result in critical gaps in knowledge, leadership, and skills.10 Nurse executives are rightly concerned that the exodus of senior nurses from the workforce. High levels of expertise and intuition common among senior nurses, is recognized as an essential element in achieving positive outcome among the most complex patients. When expert nurses leave employers, the organization and all its entities lose experience-based knowledge.10 Biggs and colleagues11 reported that a shift in thinking is occurring regarding the perception of working beyond "retirement age" suggesting that individuals are reframing this career and life phase to a time of "personal potential and mature imagination." Phased retirement is an option as opposed to traditional full-time employment or total transition to retirement, thus enhancing potential and imagination.

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Decision to Retire

Multiple studies have been conducted about the seasoned employee's decision to retire. Lum and Lightfoot12 found that health has a substantial effect on decisions to leave the workforce for people near retirement age. The authors also cited the "justification hypothesis"12(p33) that proposes that workers in favorable working situations may downplay health problems and delay retirement, whereas those in less favorable situations may exaggerate health problems and retire earlier. Employees who prepare and plan for retirement can achieve higher satisfaction during their later years.13 Weiss14 reported that 60% of surveyed nurses had done nothing to prepare for retirement. Pikitalis15 found that the announcement of a decision to retire and advance notice to an employer is a benefit as a bridge of service and forewarning of impending turnover. Phased retirement is one solution to formalize the notice by an employee of a desire to change work status or obligation.

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Phased Retirement

There is no single definition for what constitutes phased retirement. The relationship may be formal or informal, consisting of reduced workload or decreased hours or a change in role and responsibilities. Phased retirement may also be an advantage to an employer for the following reasons in addition to creating a forewarning of a future exodus from the workforce: provision of a transition period for skill, creating an opportunity for knowledge transfer, and supplementation of the existing workforce with a more flexible employee arrangement. Despite these potential advantages, there may be perceived barriers in creating changes in organizational policies to support phased retirement.

The structure of pension plans can be a deterrent to organizational support for phased retirement. Defined benefit plans base monetary payments on a formula that recognizes a combination of salary and service. A defined contribution pension plan is based on the amount of money in an individual account at the time of retirement. The presence of a defined benefit plan often poses a daunting challenge to administrators who want to develop and offer a phased retirement plan. This is primarily due to the calculation of retirement benefits based on the final years of employment. In some instances, working part-time would have a negative effect for the individual employee by decreasing future pension payments. Some organizations offer a combination of both types of plans, contribution and benefit. Employees often decline to participate in the defined contribution plan without reason, thus diminishing available cash reserves upon retirement.

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The Appeal of Phased Retirement

Employee receptivity to phased retirement is dependent on the structure of the plan as well as other variables such as personal financial well-being and the employee's satisfaction with working conditions. Part of the appeal of phased retirement will depend on the prorated salary level of the nurse in comparison to salary levels available outside the organization in alternative roles. AARP reported that people in phased retirement have higher levels of incomes than other people of the same age.16,17 The report suggested that 60% of persons in phased retirement plans indicate that they continued to work because they needed the income to support their financial status. According to Chen and Scott,16 48% of survey respondents indicated they would not be interested in participating in phased retirement if they had to change jobs. Phased retirees are more likely to be in management positions or white-collar roles, thus supporting the belief that increased skills and education offer additional career options.16

Phased retirement can be actualized for the nurse in multiple designs including seasonal schedules, shorter work weeks, abbreviated schedules, or contract project work. Each of these models has unique advantages for both the employer and the employee, depending on the individual's life situation, skills, and education and the organization's needs. In addition, these models may be considered in any practice settings and roles. Acceptance of these options is often contingent on the culture and creativity of the organization. As noted by Pikitalis,15 "Innovative corporate policies, practices, and programs are doomed to failure if the organizational culture sends contradictory messages."15(p77) Cultural stereotypes often support a negative environment for consideration of flexible options in the last phase of employment. Regardless of whether the organization offers programs such as phased retirement, coworkers may not be supportive of the compromised hours and shifting of responsibility among team members. Offering a program of phased retirement only for nursing may create untoward pushback from other disciplines in the organization. One intervention to address this concern is to develop diversity, sensitivity, and market training for staff and managers targeted toward multigenerational workforce issues and particularly nursing workforce supply and demand. Increasing the awareness of predicted shortages of nursing personnel can lead to improved acceptance and support of targeted alternative work arrangements focused more directly toward nursing. Another strategy is to use a subset of nurses as a pilot.

It is essential for human resource executives to develop age and skill profiles of employees to provide an accurate demographic assessment of the workforce. Using this type of actual data, projections can be made regarding anticipated dates of nurses' retirement in addition to that of other employees. These data will likely help substantiate a business case for implementation of phased retirement in a variety of professions. Knowledge and skills from key individuals in nursing and other areas that are deemed necessary for the organization should be identified for planning purposes. A pilot program focused on a unique role such as infection control or a difficult-to-recruit unit leadership position may be a good way to introduce the idea of phased retirement to stakeholders.

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Business Case for Phased Retirement

In a recent study by Towers and Perrin,18 the cost of turnover adds 29% to the annual salary cost of an RN. At $22.00-per-hour salary with a 30% benefit factor, 29% turnover equates to $17,866 additional cost per nurse per year. In a given hospital with a 15% turnover rate, the cost of turnover at this same entry-level salary would exceed $2.4 million a year. Salary dollar costs for business planning purposes are variable according to regional trending and years of nursing experience; however, the figures can be daunting. Outcomes for a business case should also include RN satisfaction data, which is often less quantifiable but significant in evaluating nurse engagement. Value to the system may be calculated as "cost avoidance" in looking at projected decreases in turnover. The Social Support Model19 provides a conceptual framework for designing, implementing, and evaluating organizational change for a phased retirement program.

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The Social Model

The Social Model supports examination of the socioeconomic and political context of a planned change.19 The model validates the relationship between social factors, population characteristics, and evidence. In combining benchmark evidence from the literature, the inclusion of organization-specific data and the need for the adaptation in an organization to a program of phased retirement can be determined and documented.

Application of this model to phased retirement is supported because the evaluation and introduction of a program of this nature are a dramatic departure from traditional retirement options in nursing and because of the social nature of work relationships. Characteristics of the "population" under consideration through the Social Model include aging nurses, economic realities, and workforce shortages. Data included in the evaluation of a program of phased retirement should include the hospital-specific history of "retirement-centric" data coded by position or role or typical retirement patters. In follow-up, demographic information describing the hospital workforce and projected years until retirement based on the prior history, input from staff obtained through surveys and focus groups regarding intent to stay, and data from the human resource department can be used to develop the rationale for the business case.

A team of stakeholders from human resources, nursing, education, and administration should evaluate the preproject workforce data and develop the plan. The literature search and the organizational workforce assessment are the initial steps in the process of discovery. Because of the predominance of phased retirement within the education sector, literature from multiple employment settings should be explored. Suggestions solicited through feedback of those affected in a potential pilot should be included in the development of the program proposal. Some options such as seasonal schedules may not be of interest to the targeted workforce and should be eliminated from consideration for a pilot. The development of outcome criteria to guide the monitoring of success or failure of the pilot program from an employee and an organizational perspective is essential.

Education of the employees, managers, and human resource staff members regarding the new policies and options for continued employment should be considered an imperative prior to implementation. Education of key individuals supports the social and economic success including buy-in of a pilot project as well as organization-wide implementation.

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Planned Change

Building on the Social Model, planned change must occur. Titler's20 model for change management includes a communication and dissemination strategy as part of the implementation process. The concept of stakeholders is integral to both the Social Model and Titler's model. Planned change involves the strategic analysis of the need for change (problem) that emerges from many levels. In a program of phased retirement, critical information should be gathered at the organization level and also from bedside caregivers or clinical experts. Titler21 also recommends including stakeholders at all phases in the dissemination of the new guideline or plan. The implementation of changes in retirement options necessitates that crucial conversations and planning with staff members occur including human resource executives and third-party benefit managers. For success, each of these stakeholders must have an opportunity to provide input into the program design (revisions), support collection of data for analysis, and anticipate issues related to implementation. A planned, sequential approach to change will promote outcomes based on valid data collected on all components of the program at stages throughout the process.

Conducting an organizational assessment is helpful in determining the organization's readiness to successfully deploy a new phased retirement program. In performing a readiness assessment, a SWOT (strength, weaknesses, opportunities, threats) analysis (Table 1) is recommended. Key questions to be addressed are the following:

Table 1
Table 1
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* What is the capability and willingness of the organization and system leaders to provide a program of phased retirement?

* Which positions or roles will be targeted for a pilot program of phased retirement in support of the retention of knowledge and skill? What employee-focused goals will be measured?

* What are the direct and indirect benefits to the organization from phased retirement, and how will these be quantified and measured?

As an additional step beyond the SWOT assessment, the business case should be developed to convey in a logic model the cost and benefit of a new program.22 Inputs, resources, and outcomes are identified in preparation for the initiation of either a pilot or full project implementation (Table 2).

Table 2
Table 2
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Communication to Stakeholders

All key stakeholders including the administrative board members should be educated regarding the concept of phased retirement. These groups constitute additional key decision makers (stakeholders) within the hospital environment who may associate phased retirement with a multitude of models or preconceptions. Offering a plan of phased retirement to a select group of nursing employees in a pilot program is a good technique to use in implementing a new concept. An initial success can provide a framework for demonstration of the value of the idea, an opportunity to collect data for support, and the use of a conservative approach to determine the potential for more significant change and wider application.

When reviewing the data identified in the SWOT analysis (Table 1), communication and education regarding the concept and benefit of phased retirement are key areas for implementation. Potential issues should be addressed with interventions such as "overcommunication" in multiple venues and discussion regarding the proposed goals of the initiative and the rationale for change. This intervention also supports the social aspect of the model by addressing concerns through interpersonal communication. Nursing employees, as stakeholders, need to understand that during initial focus groups and other forms of input gathering sessions, phased retirement program components are yet to be developed, not finalized, and that an opinion survey is only one form of data collection in the planning process, not a commitment to move forward.

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Traditional retirement plans shift workers from productive employment to nonemployment. Literature findings reveal that 1.5 million (13.1%) of today's retirees would have continued employment if they had been offered fewer hours even with receiving proportionate less pay.23 This question has not been explored in the nursing profession to identify a level of interest in continued employment. In addition, career fulfillment, the need for healthcare benefits, and the need to supplement fixed retirement income are often mentioned as rationale to delay full retirement.11

Phased retirement is one option to retain nursing skills in the workplace and support a slower transition to full retirement. Redefining retirement is the challenge of the baby-boomer generation and is now on the forefront of economic discussions across the globe. Some employees are moving from traditional careers to bridge jobs including as a career coach, discharge nurse roles, and specialty-focused educator positions. Evidence suggests that transition to traditional nonworking retirement is becoming less pervasive and desirable.24 Continuing employment and thus supplementation of income can lead to an improvement in the social and economic status for the older adult. Critical gaps in knowledge have been noted in the skills of managers in dealing with this issue. Gaps have also been identified in the levels of skills and institutional knowledge of less experienced employees as a large segment of the workforce prepares to retire.4

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The paradigm of retirement, including process and goals, has evolved. Bower and Sadler25 describe the current concept of retirement as a "journey" where changes in life will be carried out over decades. Decreases in the ratio of US workers to retirees in the general workforce have occurred since 1990 from 7:1 to the projected 2030 numbers of 3:1.26 This shift has implications for savings, retirement, social security, and Medicare, in addition to the skills and knowledge of the older worker. In addition, it is reported that financial stress can have a negative impact on a person's health.27

It is crucial to study options that address premature departure of aging nurses from the workforce because a decrease in the numbers of senior nurses in healthcare is cause for concern, given the skills and knowledge needed for the clinical management of complex patients and systems. The true impact on quality by nurses was based on multiple factors in the workforce including years of nursing experience.26 Phased retirement is one option to enable an organization to preserve selected skills, knowledge, and talent within the nursing workforce in addition to aiding the workers in supplementing income later in life and maintaining social contacts and relationships. The business case for keeping experienced nurses within the workforce is compelling.

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