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Retirement Benefits

Remodeling Retirement for the 21st Century

Despite dire predictions as the wave of retiring boomers grows, there is hope that employers and workers can rebuild a system mired in a 20th century mindset.

There’s a finality to the concrete definition of retirement. It’s the conclusion of one part of a person’s life and the commencement of the next, the solid boundary separating work and rest, a figurative brick wall marking a definite point between an employee’s and retiree’s timeline.

That brick wall has crumbled in recent years prompting an impassioned debate over who is responsible for life beyond the workplace. For decades, many employees retired to a generous pension thanks to paternalistic employers. But with trends like the gig economy, changing family structure and employers demanding that workers take control of their financial future, retirement is facing a distinct upgrade to meet 21st century workplace realities.

Some 10,000 baby boomers now retire daily, and the birth rate among younger generations is shrinking as employers scramble to fill empty positions — unfilled jobs that will not fund an ailing Social Security benefits system in the long term. Americans with dramatically meager retirement accounts are living longer and must support themselves in retirement well into their 80s and 90s.

Aging workers see the shortfall and realize that remaining employed is their only shot at a comfortable retirement, according to Ryan Duguid, senior vice president of technology strategy at Nintex, a computer software company in Bellevue, Washington.

“That’s the crux of the problem,” he said. “The current system dictates that we all work longer and are less of a burden on society, and the current reality is that it’s getting increasingly hard to remain relevant in the workforce over time.”

Working in Retirement: No Longer an Oxymoron 

Retirement has historically been thought of as a three-legged stool, comprised of individual savings, company pension and Social Security benefits, according to Larry Sher, partner at October Three Consulting. There’s an increasing need for a fourth leg, he added: working in retirement.

Contributing to this trend is the increased diversity of family situations, Sher said. For example, when there are dual earners in a family, one may need to retire or change the type of work they’re doing, meaning the other must continue to work at least on a part-time basis. Having children later in life puts a strain on their retirement savings and forces them to earn income for a longer period of time.

“Retirement systems need to be rethought to better accommodate a wider variety of situations,” said Sher.

People would not have to work in retirement if they saved enough during their career, but that brings up another concern. A third of U.S. workers aren’t offered a pension or 401(k) plan by their employers, according to the Pew Charitable Trusts. That percentage is higher for certain groups of people. Fifty-six percent of part-timers, 55 percent of Hispanics and 45 percent of millennials don’t have access to a retirement plan.


Robert Laura

Other people may want to work longer not out of financial necessity but because of the nonfinancial benefits work provides, according to Robert Laura, a retirement coach and president of Retirement Project, which certifies retirement coaches. Laura’s work in retirement coaching revolves around educating people about the psychology of retirement — the struggles of retiring that are not financial but social, physical and mental.

“Work provides a very powerful outlet for what you lose in retirement,” Laura said. “You lose contact with people, you lose friends, you lose a schedule, you lose an agenda [and] you lose goals.”

Employers tend to focus on the financial side of retirement rather than the other factors, he said, which presents an opportunity for them to explore the psychology of retirement. “Anyone who’s ready to step up will be able to establish themselves or their company as a leader on this topic,” said Laura.

Raising awareness among employees on the psychology of retirement can start when employees are in their 40s or 50s rather than when they’re close to 65, he added.

Some employees may feel that after retiring they won’t be relevant anymore, he said. Employers could help by offering resources including articles, books, videos and workshops that educate people on the changes they’ll experience during retirement. Former employees may struggle staying connected with other people, and losing that social component of what work provides can make them feel disconnected.

Another mistake some employees make is not planning for retirement. “Most people go into retirement with vague assumptions. ‘I might work part-time,’ or, ‘Maybe I’ll volunteer,’ ” said Laura. “[But] you have to have concrete plans for these years.”

Aiding employees in planning for the realities retirement has in store can be both valuable to the well-being of the employee and the reputation of the company, said Laura. Retirees may be a company’s best PR people, and a fond farewell sends them off on a positive note.

How Can I Possibly Work Longer?

Enthusiasm for a longer career is not universal. In theory, what would make sense is that people accept that “70 is the new 65” mentality and work longer, but that’s easier said than done, according to Steve Vernon, a research scholar at the Stanford Center on Longevity.

Part of the problem is the attitude of the individual, he said. Many people in their 40s and 50s cannot see themselves working until 70 because of factors like burnout, physically taxing long commutes or emotionally draining office politics. These are legitimate concerns, and one way to fix people’s attitudes toward retirement could be to mend one of these problems. A company could offer a work-from-home option once a week to someone with a long commute as a solution.

“For a lot of people, instead of retiring full time in their 60s, they ought to pursue a downshift strategy where maybe they’re not working as hard as they used to, but [they’re] still making money and delaying the start of full retirement,” said Vernon.


Ryan Duguid

Advances in technology may also help people stay in their jobs for longer, according to Duguid. Although tech advances can unfortunately make some jobs disappear, they can also improve the quality of other jobs. “Automation and AI have the potential to take away a lot of the mind-numbing [work],” he said.

People want a sense of purpose at work, he added, and eliminating the rote tasks so that people can focus on stimulating duties can keep them satisfied for longer.

HR professionals may face challenges when people want or need to work longer, according to Vernon. If a company wants to hire an older worker, there are potential conflicts reporting to someone younger. An experienced person transitioning down in pay and rank may not be happy, either.

These personal downshifting factors pose a challenge, and there could be legal issues including claims of age discrimination. But, Vernon added, it can work. The parties involved must be prepared to be sensitive to this fragile situation.

“It’s a desirable thing to do. It just needs to be handled thoughtfully and carefully,” he said.

Risk Shifting Vs. Risk Sharing 

As the retirement plan of choice for employers has shifted from defined benefit to defined contribution, employees have taken a larger share of risk.

“They’ll be able to retire or might be able to retire if they’ve saved well and haven’t dipped into their accounts, when the market is up and only when the market is up,” said Sher. “And when the market is up is the worst time for a lot of employers to lose their employees to retirement because when the market is up, chances are that the company needs the employees to stay.”

Shifting all the risk to employees is not going to be ideal, he said. He believes employers should move back toward risk-sharing rather than risk-shifting.

“401(k) plans are not retirement plans. They are savings plans,” said Vernon. “There’s a difference between a retirement plan and a savings plan. A savings plan is just accumulating money, and yes that’s a necessary component of having enough money to retire. But it’s not enough.”

Although they are interchangeable terms, the problem with retirement plans today is they are becoming inadequate, he said. The value of retirement plans declines as employees deal with higher health care costs and take on more risk.

Employees are more content and prepared when they have a more generous defined benefit or defined contribution retirement plan, he said. But although this robust retirement plan is more important than ever, many employers have gone too far shifting risks to employees.

“The long-term risk companies could face if their employees come up short later in their careers is that many of these individuals will hang around beyond when they want and beyond when their employer wants, too,” he said. “More of these individuals hanging on tend to be less healthy, feel stuck, disengaged and ultimately that means they are less productive.”

Not only are employees financially unable to take the brunt of the financial risk, but they’re not going to be able to make better decisions than an expert investor. And although employers should educate their employees, they should also understand that they can only do so much, he said.

“You can’t teach employees to be great investors,” said Sher. “You want them to work at their jobs. You don’t want them to be worried about and focusing on what I’m going to do with this money in my 401(k) plan. You want to engage employees in a discussion, but you don’t want to overwhelm them.”


Larry Sher

A delicate balance comes into play here. How does a company ensure that giving employees more financial responsibility doesn’t come at the expense of employees’ overall well-being? “The question at the end of day,” said Sher, “is how much paternalism do we want versus flexibility?”

That question looms large over many workplaces. Whether employers are considering how much financial burden to put on employees, how much assistance they should offer in helping people prepare for retirement, or how responsible they should feel about keeping their older workers gainfully employed are potential solutions to fend off the silver tsunami washing over the retiring workforce.

[Go here to read more from the Retirement Ready? series]

Striking a balance between these options could help cement the confidence that retirement is a sound option for workers while making employers more attractive to the future workforce.

Andie Burjek is a Workforce associate editor. Comment below or email editors@workforce.com.