Valued older workers are thinking seriously about retirement again. Here’s why—and what your organization can do about it.
Late in the last decade, many valued older workers were getting ready to head for the doors and into the golden years of retirement. Most organizations weren’t prepared—they didn’t have qualified people ready to step into soon-to-be-vacated critical roles, and they had no viable retirement management strategy. What happened next—a deep recession, declining stock portfolio values, soaring health care costs—reset the retirement clock for many, allowing organizations to delay facing a potentially major talent crisis. But now, retirement is again poised to become a serious problem for many organizations in the U.S.
As economic conditions have improved to the point where a greater number of older workers are again finding retirement both appealing and viable, the question to consider is whether or not your organization has “ready-now” replacements. If your organization is like most, the answer is no.
There are steps you can take, however, to manage the loss of valued people to retirement and buy more time to find or develop replacements for key positions.
Consider the plight of those who were at or near retirement age during the recession: They watched helplessly as the value of their stock portfolios dropped 30 percent or more in a matter of weeks. They did the math and quickly determined their lifestyle in retirement wasn’t going to be what they’d hoped.
Rising health care costs also gave them pause. Workers who didn’t have a company-paid health care plan that would carry over into retirement were scared of what might happen if they got sick. They knew personally, or had heard of, people with illnesses whose medical bills were financially crippling, and how even the best health care plans didn’t cover all of the costs.
For many, though, especially those in good health, the decision to postpone retirement wasn’t just an economic one. Many liked their work and their colleagues, so they decided to continue working.
Now, however, there are five factors that stand to create dramatic increases in the number of retirements:
The stock market has rebounded. The Dow Jones Industrial Average hit record highs in 2014, finally reclaiming the valuation that was lost during the recession. Other markets, including the NASDAQ, also have bounced back. As many investment portfolios are healthy again, many older workers feel that they can be financially secure in retirement.
Inflation remains low. At the end of 2014, the U.S. inflation rate was below 1.5 percent. It has hovered at about two percent or lower since 2012. This adds further to older workers’ confidence that they will have a sufficient retirement nest egg.
The new health care regulations. The Affordable Care Act, which provides for coverage in case of catastrophic health events and ensures the availability of insurance for people of any age, regardless of pre-existing illnesses, is giving older workers peace of mind that health care won’t be a financial drain on them in retirement.
Those who delayed retirement are older now. People who were age 65 when the recession hit are now in their early 70s and may see retirement as a more attractive option than they did before.
Part-time employment options are plentiful. The unemployment rate is at its lowest level since the recession, and there seems to be a multitude of available jobs for highly trained, highly skilled people who may want to continue working—but not full-time. There also are options for older workers wishing to work full-time but to do something different from the job they currently hold.
The risk for employers
When valued workers retire, a great deal of talent, knowledge, and experience walks out the door. But organizations don’t have to just stand by and watch it happen. What’s needed is a sound, systematic approach—a retirement management system—that anticipates retirements, prepares people to step into key roles, and, where needed, makes accommodations to keep specific people in the fold (e.g., in part-time or modified roles) until replacements can be developed.
Retirements aren’t bad for an organization, of course. When workers retire, more opportunities are created within the organization for younger employees to step up and grow. It also provides the chance to bring in fresh thinking. Retirements are only bad when organizations are unprepared and must fill critical roles with people who either aren’t ready or aren’t a good fit.
Get ready to manage retirement!
A retirement management system is the best approach to guard against the huge potential consequences of losing valued workers with unique skills, knowledge, or connections that are important to the organization—and not having appropriate replacements. Many organizations try their hand at retirement management at the very top levels, but few organizations have a systematic retirement management program targeting those few people at all levels whose retirements will cause the greatest disruption.
Such a system covers the following steps:
Identifying the jobs where there’s the greatest risk. While the departure of senior managers or executives may have the most visible impact, the retirement of valued lower-level workers is also a concern. These valued workers may have scientific, technical, or specialized skillsets that make them difficult to quickly replace. You need to identify these people, assess the risk and time associated with replacing them, and then be willing to work with them to buy more time for replacements to be hired or developed. This typically won’t be a large number of people; just the few whose departures would create the greatest headaches for the organization.
Find ways to postpone or redefine retirement for key workers. Once you have identified the workers you want to keep, you need to open a line of communication with them about their future. These conversations are critical because not everyone will have the same plans or needs. While some may be determined to retire and stop working, others may prefer to be part-time. Still others may wish to keep working full-time for a while longer, but have their jobs change to incorporate new tasks or responsibilities.
It’s the individuals who want to continue working that you will want to engage to see if you can make a deal that is mutually beneficial to them and to the organization. As you are striving to buy more time for the organization to identify or prepare replacements, you might need to get creative in what you are offering these older workers.
Some ideas might include:
Special accommodations such as these may run up against existing HR policies, as they would only be offered to a select few individuals. But these are special people whose potential loss poses a significant risk to the organization. And while discretion is warranted in making these arrangements, the fact that a few individuals would be singled out for special treatment shouldn’t be a reason not to consider creative options.
Offering additional vacation time.
Allowing them to work remotely.
Creating a new role in a different part of the company where they can apply their experience and skills to new challenges and with new clients.
Paying for them to attend professional conferences or other work-related events that would provide travel opportunities.
Establishing a formal mentoring relationship, where the workers take an active role in training their replacements.
Review and revisit regularly. Special arrangements you make with retirement-age workers should be short-term deals—no more than two to three years—as you are applying a temporary “patch” rather than fixing the problem permanently. You’ll want to review these arrangements regularly to make sure the organization is holding up its end of the bargain and also to confirm the older workers are performing as expected (these workers should continue to be covered by your performance management process).
Despite the logic of identifying and finding creative ways to keep valued older workers, too few organizations in the U.S. have an effective retirement management system. There are a few that are seeing the problems and possibilities of a surge of retirements and are being proactive, but these organizations are few and far between. For everyone else, the time to get serious about retirement management—to know the extent of the risk and to take action—is right now. The clock is ticking!
William C. Byham, Ph.D., is DDI’s chairman and the author of 23 books, including 70: The New 50: Retirement Management: Retaining the Energy and Expertise of Experienced Employees.