Posted on June 25, 2005 at 11:05:46:
According to a recent study, nearly two-thirds of older workers would cut back and work part-time before retiring completely—or even after retirement—if it didn’t jeopardize their retirement benefits. Most defined-benefit pension plans, though, are based on the employee’s last three to five years’ of pay, so cutting back would cut pensions, too.
The IRS has proposed new regulations that would allow employees who are at least 59 ½ and who reduce their hours by at least 20 percent to collect partial pension benefits while continuing to work. The worker would continue to earn pension benefits, while those earned on an earlier, higher pay would be protected. It’s especially helpful for those too young for Social Security. IRS rules already allow workers with defined-contribution 401(k) plans to withdraw money at age 59 ½, although some companies forbid such distribution while the employee is still working.