The Age of Unretirement: How Employers Can Manage Generational Shifts

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It’s no secret that the American workforce is aging, and fast. By 2030, almost 10% of the workforce — an estimated 30.4 million employees — will be over 65, according to a study from the Alliance for Lifetime Income's Retirement Income Institute. This elicits concerns around resulting labor shortages and knowledge transfer gaps in the workplace. But there is another layer to this challenge: What if not all these workers can retire?

The Age of Unretirement

Many older Americans are choosing to continue working past the traditional retirement age. In fact, between 2020 and 2030, it’s estimated that the number of American workers aged 75 and older will increase almost 100%, making up an estimated 11.7% of the workforce, according to data from the U.S. Bureau of Labor Statistics. For some, continuing to work is a social and emotional decision, with the workplace being more flexible and age-friendly than ever before. However, for many older employees, continuing to work is a necessity, not a luxury, as they face a looming retirement for which they are not financially prepared.

This phenomenon of “unretirement” — employees choosing or needing to continue working past the traditional retirement age of 65 — poses unique challenges for American workers and companies. As the dynamics shift and more American workers surpass age 65, there is a dual challenge for employers and HR executives to tackle: to support older employees in the workplace as they approach — or surpass — retirement age, and to ensure those who remain in the workforce for decades to come are well prepared to fill the gap.

Retirement Regrets

Overall, there is a concerning lack of retirement preparedness within the American workforce. About a quarter of Americans of retirement age have no savings at all, and even among those who do have retirement savings, many are not satisfied. Half of Americans wish they had started saving for retirement sooner, and only 60% of women say they are confident in their retirement savings. If employees do not feel they can retire with sufficient financial resources, they will continue to work.

For workplaces where their employees can retire at age 65, these companies are faced with a different set of challenges: knowledge loss from retirement creates associated risk and costs. Replacing an experienced worker can cost 50%-60% of their annual salary, not to mention the cultural shifts that may occur within teams of remaining employees.

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Navigating the Challenges: Solutions for Modern Employers

Considering these challenges, it’s more important than ever for employers and HR executives to address the needs of a multi-generational workforce by cultivating a physically and socially age-inclusive workplace. 

The first step is to offer tools, resources, and options for employees as they approach retirement. Many employers already offer programs like 401(k) matching, allowing employees to maximize their annual contributions. Plus, employees over 50 may be able to make an additional catch-up contribution to ensure they’regetting the most out of their 401(k) as they approach retirement age. However, there are additional tools employers can leverage — like auto-enroll and auto-increase options, which makes it even easier for employees to save more every year. Additionally, programs like phased retirement or flexible retirement paths can offer a more gradual transition that alleviates pressure on existing teams and allows retiring employees more time to save.

Another way to ensure retiring employees leave behind a well-prepared workforce is offering knowledge transfer programs, which can help preserve expertise, trainup new employees for evolved roles, and maintain continuity within teams. Corporate alumni programs can also be a successful way to ensure continued engagement by retiring employees, maintaining a system of collaboration and knowledge-sharing even after employees have left the workforce.

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To stay in sync with shifting workforce trends and remain competitive in the broader labor market, it’s important for HR leaders to proactively consider how their workplace offerings could support employees across the generational spectrum. Doing so will help employees transition to a successful retirement while supporting the broader workforce today and as they work toward their own retirement.

Lorna Sabbia is a 31-year veteran with Bank of America, serving as Head of the Workplace Benefits business, which encompasses 401(k), Equity and Health Benefit plans for companies of all sizes, client service and management, plan participant experience, retirement research and insights and distribution.