Retirement, deferred: The new reality
Life after 65 is starting to look a lot more like life at …. 64. The percentage of Americans working past the traditional retirement age hit new highs in the most recent jobs numbers, according to recent reports, with 19 percent of those 65 and older working at least parttime. And it’s only expected to increase: The over-65 set is expected to be the fastest-growing demographic in the workplace by 2024, according to the U.S. Bureau of Labor Statistics.
So what are companies doing to respond? A few have redesigned manufacturing plants to adapt. Some lucky employees are getting higher 401(k) matches to help them save. More recently, many companies have launched financial wellness programs to help employees of all ages make sure they’re better prepared to retire on time.
One might assume “phased retirement” programs, a benefit begun 15 years ago or so to help employees gradually step away from their jobs, would be hotter than ever, offered to give workers a way to keep working part-time or in alternate arrangements while helping companies hold on to workers with valuable skills.
But the numbers don’t show that. According to Worldatwork, a nonprofit human resources association, the percentage of companies that offer the benefit — 29 percent — dipped slightly in 2017, and growth has stalled over the past six years. The Society of Human Resources Management, whose surveys include more small and mid-size companies, found that the use of formal phased retirement programs is just six percent while informal use of the idea has ticked up to just 13 percent.
“We haven’t seen a flood of large employers saying we want to have phased retirement programs lock stock and barrel,” said Roselyn Feinsod, a senior partner in Aon Hewitt’s retirement practice. “We just haven’t seen a huge prevalence.”
However, that doesn’t necessarily mean employers are being more stingy about a more gradual retirement. Human resources experts say that instead, companies are offering the option to near-retirees under the broader umbrella of flexible work arrangements — a development that could help older workers in some ways, but possibly hurt if they work for organizations where flexibility isn’t as highly valued.
“If there’s anything employers want, it’s a committed employee,” said Jacquelyn James, co-director of the Center on Aging & Work at Boston College. “They don’t want a sign they’re one foot in and one out the door.”
Phased retirement, human resources experts say, emerged in the early 2000s as companies grew concerned about a Baby Boomer exodus. The programs saw an uptick in popularity around the middle of that decade after regulatory changes helped address questions about how traditional pension benefits would be paid out, said Lenny Sanicola, a senior practice leader at Worldatwork, but then the benefit fell in popularity during the Great Recession, as so many workers felt they could no longer retire.
The prevailing trend now is to include the option in the parttime, job sharing and other flexible arrangements that the employer offers to all workers
One upside to this trend for older workers, James said, is that employees won’t have to be as clear about their plans with their boss. “The phased retirement has a lot of complications to it,” she said. “It means you are signaling to the organization that you’re retiring,” even years out, when more promotions or big assignments could be in store. Another issue with more formal programs, she said, is that they often require employees to set a retirement dates.
Still, she points out that people who work for bosses who frown upon flexible work arrangements more broadly could have a tougher time. “The downside will be if the organization has policies on the books but doesn’t really support them,” she said.
Renee Mcgowan, who leads Mercer’s global retirement savings and financial wellness business, said there’s also “absolutely” a risk that such approaches to flexibility won’t help older workers if employers don’t communicate them well, and they seem more oriented toward, say, parents of young children. “We’re going to need a far more overt conversation around employers and employees about their retirement plans,” she said.
In addition to the shift in flexibility programs for older workers, Mcgowan and others said the recognition that people aren’t financially ready to retire has made “financial well-being” programs a popular new corporate benefit. Employers, she said, are “realizing that ‘I can’t expect my employees will want or be able to retire at 65. How do I help ?’ That’s been a huge impetus for the financial wellness programs,” she said.
The benefit, which can include financial education, actual coaching and advice on everything from college savings to when employees can afford to retire, have grown in popularity in recent years but “have become really hot this year,” Mcgowan said.
The most sophisticated companies, Mcgowan said, are recognizing this is a challenge that’s here to stay, and planning for a future where the skills and careers of over-65 workers are very much part of the workforce.
“There is this large shift from a world where employers really wanted people to retire at 65,” she said, “to one where they realize that may not be a reality, either on the part of employers or employees.”
“We haven’t seen a flood of large employers saying we want to have phased retirement programs lock stock and barrel.we just haven’t seen a huge prevalence.” Roselyn Feinsod, a senior partner in Aon Hewitt’s retirement practice
Job seekers 55 and older arrive at the District of Columbia's Department of Employment headquarters in Washington, D.C., in 2012.