How Businesses Account for an Aging Workforce
While 65 is the traditional retirement age, new studies show that today, workers have other plans. Many organizations are realizing they need to seriously consider how they will cater to this growing community of older workers. This may mean reducing the number of promotions for up and coming talent, and greater labor costs. Yet with more senior workers comes greater experience, wisdom and other valuable assets useful in business. Here’s what you need to know about how organizations stay ahead of the aging curve.
The Current Status of Health and Retirement for Older Workers
A report from the nonprofit Transamerica Center for Retirement Studies (TCRS) examines retirement for Baby Boomer workers and the level of involvement among employers to facilitate their transition into retirement. According to Catherine Collinson, president of TCRS, many retirees are forging new models of retirement.
- 65% of workers plan to work past age 65 or do not plan to retire, and 52% plan to continue working after they retire.
- 62% of the boomers who plan to work in retirement and/or past age 65 say their main reason to continue working is for income or health benefits, while 34% plan to work for enjoyment, 18% for involvement, and 16% who enjoy what they do.
Why People Continue Working After Retirement
Another study from Merrill Lynch found that nearly 3 out of 5 retirees launch into a new line of work after retirement and working retirees are 3x more likely to be entrepreneurs than pre-retirees. Today, 40% of people aged 55+ are working and account for virtually all workforce growth in the last several years. With new forms of technology rapidly changing workspaces every day, many older workers have found it necessary and suitable to continue along this rapid growth for many personal and external reasons.
Survival and Benefits
- Access to company-sponsored medical coverage and an employee’s 401(k) are key reasons older employees may continue working, which can be affected by factors such as the size and incentives of employer contributions, and the availability of retirement savings advice and education.
Purpose and Personal Growth
- Sociologist and entrepreneur Hal Spielman, through his company McCollum/Spielman Worldwide, dispelled the common myth that retirees work just for money and discovered that older workers strive to be mentally active after retirement, taking entrepreneurial ventures, or part-time consultancy in their fields.
What Challenges do Companies Face?
Cost
- Companies must carry additional costs to maintain, such as health care, which older employees often cost companies more to provide coverage. Although many do not have dependents, it’s still not cheap to provide the insurance needs of older workers.
Different Processes and Expectations
- There are skills and experiences that older workers bring, such as industry experience, historical perspectives or networks, which result in company value. Without a set process, however, companies may fail to utilize the potential resourcefulness of older workers.
- The TCRS survey found distinct differences between expectations from older workers and the realities that employers’ set. Only 48% of employers have practices in place to enable shifting from full-time to part-time and only 35% of employers are in succession planning, training, and mentoring.
Job Competition
- In a tight job market, younger workers may have fewer opportunities when paired with senior employees that stay longer on the job, since there may not be enough space for younger workers in the search for a promotion. The Society for Human Resources Management recognizes the importance of laying out succession plans, and some companies may mandate retirement as the only way for younger workers to step into higher level roles.
Culture Shifts
- Companies need to be fast and adaptable to the changing competitive and technological climate, and cannot afford to be slowed down by workers who may not be able to keep up. Older workers may also lack the luxury of deciding when they’ll retire, due to factors such as mergers, downsizing and other cost-cutting measures that affect the company culture.
What can Businesses do for Older Workers?
Provide Further Education for Benefits and Contributions.
- In a Towers Watson survey of 457 U.S. large and midsize employers with retirement plans, 84% of firms said they expect to increase education efforts on retirement information, such as tax incentives, Social Security and Medicare benefits for employees over the next two or three years.
Invest in Options After Retirement
- As the average life expectancy rises, older workers face stereotypes of being less motivated, a business risk, or too costly to maintain. However, over time mature workers become seasoned professionals who have the knowledge to help contribute to your business success. Businesses must create a series of options and pathways for smooth transitions in management and leadership.
Create a Flexible and Phased Transition to Full Retirement.
- Eventually, employers can deploy strategies to help facilitate a transition into retirement, which can help them optimize their own workforce management efforts and enable worker’s greater flexibility to retire on their own terms. Workers may face complex financial decisions regarding retirement, so succession and continuity planning is a must for every employer.
