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Older Workers Exercising Plans to Delay Retirement

According to the Employee Benefit Research Institute’s Retirement Confidence Survey, 1 in 5 workers say they aren’t going to retire on time. How are companies preparing for this trend of older workers who don’t leave—or who are applying for jobs?

May 17, 2011
Related Topics: Retirement/Pensions, Workforce Planning, Compensation

In 2002, Roger Gilchrist took an early retirement package from Valeo Electrical Systems Inc. in Rochester, New York. He was 50 at the time, and today says retirement was better than staying with what seemed to be a failing company.

Gilchrist was right; parent company Valeo shuttered the Rochester plant in 2005.

While Gilchrist says his retirement package was adequate, he still had college tuitions and other expenses to pay. He didn’t want to tap into his Individual Retirement Account while he still had the energy to work.

As a member of the YMCA of Greater Rochester, Gilchrist was able to get a part-time job as a group exercise instructor soon after his early retirement. Today, he works 35 hours a week as a fitness coordinator for the YMCA’s Southwest Family facility.

“Finances can always be a stressor, especially what’s happened in the past two to three years,” Gilchrist says. “I’ve been able to stick with this job, and it has carried me through.”

Gilchrist isn’t the only American making changes to retirement goals. The days of a handshake from the boss and a gold watch as a parting gift at the retirement party are quickly vanishing. According to the Employee Benefit Research Institute’s 2011 Retirement Confidence Survey, 1 in 5 workers say they aren’t going to retire on time.

About 36 percent cite the poor economy and 16 percent say their lack of faith in Social Security is forcing them to postpone retirement, and 13 percent say they simply can’t afford to retire.

“People are finally getting a glimpse of reality and realizing how bad things are,” says Jack VanDerhei, the institute’s research director. “We are at a situation now where people are realizing the financial straits they are in.”

The first wave of baby boomers started hitting retirement age this year, but the U.S. Bureau of Labor Statistics show older workers are staying at their jobs longer and actually want to work. In EBRI’s study, workers say they are more than twice as likely to work up to age 70 or older, a 25 percent increase from a decade ago.

With so many older workers planning to remain in the workforce, companies are analyzing how to manage the growing trend and make it work to their advantage.

Employers should create strategic plans to identify human capital needs going forward, says Betsy Dill, a partner and global retirement strategist for HR consultant Mercer in Los Angeles. Part of that strategic plan is understanding how retirement plans can drive certain behaviors.

“Organizations need to take advantage of particular expertise at the time they need it,” Dill says.

At eBay Inc., the average employee age is about 40, but the online auction company is adapting to a more flexible workforce and looking to hire mature workers with skill sets necessary to complete specific tasks, Robin Colman, vice president of benefits said during a Mercer webinar on the future of retirement.

“Getting people who are specialists at the moment rather than being trained up speaks to having a more flexible and more mature workforce, where people have gained experience somewhere else and come in for three to five years to help us jump-start a new initiative,” Colman said.

At the April webinar, Colman said San Jose, California-based eBay recently hired a senior executive who wanted to work a few more years and fulfilled a need at the online auction company.

“He is perfect for what we need today and we structured a compensation package to bring him in,” Colman said. “We are going to do this more and more.”

Alan Glickstein, the Dallas-based senior consultant at Towers Watson & Co., said retirement plans used to be the incentive that moved employees into retirement. Rather than having a target date or age for retirement, employers are now looking at how plans can be used to ease out workers so companies can take advantage of employee knowledge before losing them.

In the future, “companies will offer retirement plans simply out of goodwill. It will help manage the workforce,” Glickstein says.

After a surge in senior members at the YMCA of Greater Rochester, management saw a need to have a staff that reflects the organization’s new demographics, says Fernan Cepero, vice president of human resources.

“Members who see fitness instructors, greeters and management that look like them, the reaction is very positive,” Cepero says. “They feel welcome.”

The YMCA actively recruits older workers and turns to its senior membership to fill open jobs. Of its 2,800 employees, about 25 percent are over age 50, Cepero says. Employees who work at least 20 hours are automatically enrolled in the defined contribution plan. Plus, some employees can qualify for a deferred compensation plan.

“We want our employees around for as long as they want to be with us,” Cepero says. “Benefits are definitely helping keep” workers here.

Workforce Management Online, May 2011 -- Register Now!

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