An increasing number of Americans are deciding not to stop working at the traditional retirement age of 65, and its forcing leaders at organizations big and small to adjust their workplace practices.
Already the US government is expecting the number of people in the workforce aged 65 or older to grow significantly through 2024. And the latest evidence comes this week from global asset manager Netixis, which ranked the United States No. 17 in its 2017 Global Retirement Index (Norway was No. 1), three spots lower than last year. Today’s retirees are a lot less happy about the quality of their lives than retirees a decade ago, Netixis says. As a result, many are sticking around to work.
The retirement slowdown, combined with a slow growth in the number of younger workers, is creating a quandary for employers. It used to be that a company could count on people joining, working until they were eligible for Social Security and then retiring, upon which time they were replaced by someone younger. Now many firms find that they need to be proactive in myriad ways that include abandoning decades-old workplace practices. “The notion of being more proactive with your workforce is there whether you want to speed up changes in it or slow down changes,” says Andrés Tapia, global practice leader for workforce performance, inclusion, and diversity at Korn Ferry Hay Group.
There are many reasons that individual members of the Baby Boomer generation don’t want to stop working, of course, such as a lack of finances, a passion for a particular career or wanting to avoid boredom. But those individual decisions add up. Indeed, the U.S. government predicts that the number of people in the workforce age 65-74 will grow 4.5 percent each year and the number age 75 or older will grow by 6.4 percent annually through 2024. The phenomenon presents both threats and opportunities, Tapia says.
More firms are looking into so-called phased retirement as a way to help keep older workers around awhile longer. “People start working 30 hours or 20 hours a week and lose their big title. It’s not just fewer hours, it is less responsibility,” Tapia says. The idea is that younger employees can start taking on more responsibility in a measured way and be mentored by the more experienced employees. Such staggered retirements might also inspire changes to retirement plans. Traditional pension plans are often based on averages of the final years pay, so having someone work part time could cut into their ultimate pension unless supplementary compensation is provided.
Other organizations are trying to improve the retirement security of their workforces. For example, some are increasing their contributions to retirement plans to help boost employee pension savings. The size of the increase, 0.9 percentage points, is the largest jump in such contributions in a decade, according to The Wall Street Journal. Of course, employers can give them bigger financial incentives to leave, such as early retirement packages, says Tapia.
Whatever the choices made, Baby Boomers sticking around the workforce is making employee management far more creative.