Not Quite Ready to Retire

By Lisa Takeuchi Cullen

Two years ago, Bob Markway retired. Or so he thought. After joining Shell's exploration and production unit in 1973, Markway had climbed the ranks to manage its deepwater operations in the Gulf of Mexico. He had reached an age and accumulated enough years of service to sail off into the sunset with a good pension. Both kids' college tuitions and one of their weddings were out of the way; his 46-ft. sailboat, the Sazerac, beckoned. But then Hurricane Katrina walloped his house two blocks from Lake Pontchartrain, and his plans for a clean break from his career shifted. "Suddenly, having cash outside of retirement plans began to look like a pretty good idea," says Markway, now 55. Besides, he felt a need to be useful. When Shell offered him interesting work on a project basis, he took it--on the condition it not interfere with sailing season.

What Markway is experiencing is a new kind of American career stage: the not-quite-retirement. As life spans lengthen, pensions tighten and workplace rules change, hopping from full-time work to full-time leisure is appearing less realistic and, to some, less desirable. The trend has given rise to a new category of employment, the so-called bridge job. Economists use this term to describe part-time or full-time jobs typically held for less than 10 years following full-time careers. According to a 2005 working paper from the Center on Aging and Work at Boston College, one-half to two-thirds of workers take on bridge jobs before fully retiring--one reason the number of workers 65 and up is expected to increase 117% by 2025. "Why go from 100 m.p.h. to zero?" says Joseph Quinn, a Boston College economist and co-author of the paper. "You wouldn't do that in your car. You'd do 70, then 50, then 20."

The prolonged-work ethic comes at a time when American companies face a demographics-driven crisis: What happens when the 76 million baby boomers retire? As older workers begin to leave work in droves, economists project a labor shortage of 10 million by the end of the decade. Some industries, such as utilities, education and energy, are already struggling to stanch the institutional brain drain. So, older workers want to keep working, and employers need them--crisis solved. Right? Not quite, says Deborah Russell, director of workforce issues at the AARP. Revamping retirement systems requires shifts in attitudes and bureaucratic pension rules. "It comes down to the perception that if you're 58, how much do I want to invest in you?" she says. "This is a critical issue for employers to overcome--for their own good."

Like Shell, some major employers are ahead of the game, offering options like bridge jobs to attract and keep older workers. The advantages are many: surveys find older workers score high in company loyalty and productivity, and the bridge period can be used to transfer a veteran employee's knowledge and skills to the next generation. Quest Diagnostics, Cendant Group, New York Life and Verizon were among 11 corporations that recently teamed with the AARP to figure out how to hire and retain over-50 workers. Eli Lilly, Procter & Gamble and Boeing partner with YourEncore, a placement company for retirees seeking project work. CVS/ pharmacy, Home Depot and Borders have "snowbird" programs to allow older workers to migrate south in winter, jobs in tow.

CVS learned in the early 1990s that less than 7% of its staff consisted of workers over age 50--a problem for a business with many older customers. Executives turned to networks of seniors, including local church groups, to spread the word about senior-friendly jobs with flexible hours and health benefits. It worked: CVS has raised its proportion of over-50 staff to nearly 18%. "For us, it was a business decision," says Stephen Wing, director of government programs. "We want our staff to look like our customers. Besides, older people have better customer-service skills."

Attracting and keeping older workers take some creativity. John Johns, 65, recently tried to retire from his job as a CVS pharmacist in Sea Isle City, N.J., so he and his wife Patricia could spend winters in Cocoa Beach, Fla. CVS persuaded him to keep working--by creating seasonal jobs for him in both locations. He enjoys the work, and the health plan covers his wife, who is not yet eligible for Medicare. "At this point in my life, I want to have more freedom, and they've accommodated me."

But while older workers are often eager to cross such a bridge, many companies haven't built it yet. Antiquated pension rules continue to push older workers out the door by penalizing or just not rewarding service beyond a given date. Some younger workers assume seniors can't keep pace with fast-changing technology and business pressures. Many also believe older workers strain payroll and benefits packages, although a recent AARP/Towers Perrin study showed that keeping older workers costs employers just 1% to 3% more than the cost of replacing them. Half of employers make no attempt at all to retain older workers--even those who are key to the business, according to the Society for Human Resource Management.

At IBM, the aging workforce represents both a business opportunity and an internal dilemma. Over the past year, the technology giant, based in Armonk, N.Y., has launched a business initiative focused on the aging workforce, with consulting packages, software and other tools to serve older employees and the companies that employ them. But like many of its clients, the company is encountering issues presented by its own aging workers. Facing narrowing profit margins and changed employment norms, IBM announced in January that it would freeze its pension plan.

At the same time, IBM launched a $2 million program that will pay for tuition, licensing and interim salaries for employees who want a bridge to new careers as math and science teachers. Kathy Kelly, 58, plans to cross over. In her 36 years with IBM, she has stuck with the company through 18 different job titles and assignments in China and Chicago. As the single mother of two school-age children, Kelly isn't ready to retire but needs to dial back the 24/7 demands of her job as a global-strategies director. Teaching middle-school math will better match her schedule to her children's, she says, while "fulfilling an old dream and giving me new challenges."

Pensions pose some of the biggest challenges for companies that want to keep older employees. The Internal Revenue Service prohibits employers from distributing pension payments to workers still on the job. And since many companies base the size of the pension on the worker's last two years of employment, outright retirement at a career peak is much smarter financially than phasing down to a lesser-paying bridge job. While some companies rehire retirees as independent contractors, "what's more likely to happen is, people will simply leave a job and then bridge with another employer," says Ken Dychtwald, co-author of Workforce Crisis.

Meanwhile, the companies that are finding ways to hang on to their older workers benefit from an intangible, perhaps undervalued commodity: wisdom. At Shell, Markway is creating a strategy for updated safety standards gleaned from his decades of experience. "With the demographic cliff we're facing, it's doubly important for us to pass on our collective knowledge to the young guys coming up," he says. "At this rate, I figure I'll work another few years." Full-time sailing will have to wait.