Millions of Boomers May Retire

December 1, 1997
Ann Lang, 50, is a nurse in LaCrosse, Wisconsin. Her retirement dream includes volunteering in her community, creating scrapbooks for her grandchildren, marveling at the Parthenon and building a cabin. Cheryl Finley, 33, is a New York City-based art appraiser. She's determined to work until the day she dies. Lang was born about the time Dr. Benjamin Spock wrote the now-classic "Baby and Child Care." Finley was born when the Beatles were becoming a global phenomenon. By definition, both women are baby boomers. Although each may differ in her retirement goals and level of preparation, both of them represent the largest single generation ever to rock the American workplace.

By the year 2011, the first of the baby boomers will turn 65. According to the "1997 Retirement Confidence Survey"—released by Washington, D.C.-based Employee Benefit Research Institute (EBRI)—among others, the Golden Years already may be tarnished. Many boomers, they say, dream of early retirement but have accumulated little in the way of savings and have done even less planning to make that retirement happen. In fact, 54 percent of boomers aged 34 to 44 and 38 percent of boomers aged 45 to 52 want to retire by age 55 or younger. Yet, only approximately one-fourth have saved for it. And, only 27 percent of working Americans have any idea of what they will need to accumulate in order to retire when and how they want.

With such false optimism right now—call it denial—large numbers of boomers may opt to retire at or before age 65. The implications of this for companies are huge. Being that boomers right now represent 52 percent of the working population, employers could face a mass exodus of employees, including their experienced managers. You can avoid a staffing disaster by providing ongoing training, phased retirement and realistic financial planning education to sustain their productivity and loyalty—while they're still on the job.

First, assess your boomer workforce.
Michael McDaniel is an associate professor in the department of psychology at Silver Lake, Ohio-based University of Akron. A 43-year-old baby boomer, he specializes in industrial gerontology—what he describes as a cross between the study of older workers and industrial psychology. He points out that the history of retirement isn't that long. "People didn't retire before 1900," says McDaniel. "They worked until they died." Only with the growing wealth of society this century, and extended mortality, did the American worker begin dreaming and planning for retirement as it's known today.

Of course, it's too soon to tell whether the majority of baby boomers will or won't retire in their 60s. But for every boomer that does, you need to assess the business impact. Start by conducting a demographic study of your current workforce.

Based on the demographics of the workforce, you can stabilize your company accordingly. For example, if early boomers (those in their 50s) make up a large proportion of your workforce, you needn't cut their umbilical cords prematurely. Consider their assets. Boomers, for the most part, still embrace their parents' work ethic of company loyalty. They also possess experience, good judgment, high commitment to quality, low turnover and regular attendance—attributes highly valued by employers when making decisions on hiring, promotion, job assignment and retention. Moreover, they're far more technologically knowledgeable than their parents. And they can serve as inspiring mentors—provided the channels are created to pass on their professional and life lessons. "Remember, it takes two busters (Generation Xers) to fill the shoes of one boomer because the Xers don't share the boomers' ethic to work as long or as much," says Marilyn Moats Kennedy, managing partner of Career Strategies, a management consulting firm based in Wilmette, Illinois.

Kennedy advises HR to negotiate some form of legal contract with early boomers—now. Such contracts, she says, can stipulate what kinds of benefits would be offered for one to two years of extended employment. Boomers are a gold mine in terms of their skills leading and adapting to various organizations. "It's the first generation that hasn't had to live with the notion that what you're trained to do, you do for the rest of your life," adds Marc J. Wallace, founding partner of Center for Workforce Effectiveness in Northbrook, Illinois.

On the other hand, aging boomers inevitably will face increased memory loss, impaired hearing and vision, heart diseases—and yes, even loss of confidence. To maintain your boomers' confidence to meet tomorrow's business challenges, you also will need to reexamine training practices.

Help aging boomers set new training goals.

The nature of employee training increasingly will be driven by boomers' demographics. Because the number of people aged 50 to 65 will increase, HR professionals must develop, preserve and renew the skills of these aging workers.

According to the Alexandria, Virginia-based International Personnel Management Association, older employees may be less likely than younger employees to learn new skills. At least, that's the way it has been in the past. Although baby boomers exhibit a more insatiable thirst for knowledge, skills and experience than their parents, they may still require the HR staff's sensitive encouragement. Aging employees may ask themselves:

  • Is this training worth the time and trouble it will take?
  • Can I master the new skills?
  • Will I be the oldest person in the class?
  • If I successfully complete the training, how will I be rewarded?
  • Will I be eligible for a promotion?

Such insecurities can be overcome by explaining why training is necessary, linking training to valued rewards and helping boomers extend their sense of self-responsibility for their own training needs. Your objective is to create a win-win situation, whereby HR personnel and employees agree that training or retraining pays off for both individual employees and the company.

By asking probing questions, HR staff members can help aging employees determine their training goals and objectives while not telling them what to do. Good questions can help them think through a problem—and possibly lay a foundation for future vocational interests down the road. Be a nonthreatening coach—and your company's employees will maintain the confidence to master a new skill, face their approaching retirement with dignity and become more valuable to the company while they're still on the job.

Consider phased and partial retirement programs.
As baby boomers request retirement, employers will reconfigure the 40-hour-week schedules so as to keep some of them at least part time. Workers increasingly want flexibility. One step in this direction is the use of phased, partial, gradual, tapered or flexible retirements.

Under such arrangements, workers prepare for retirement by scaling back their work schedules at a certain age, according to Bethesda, Maryland-based Watson Wyatt Worldwide, which conducted a survey of 500 client companies last April. But such arrangements aren't yet commonplace—even though the idea isn't new.

Long ago, workers, whether they were peasants or craftsmen, retired in stages as their physical strength and stamina gradually diminished. Retirement amounted to a progressive downsizing of the workload. Industrialization and factory regulations changed that, and retirement came to a halt. Today, the pendulum is slowly swinging back to retirement's original beginnings.

Phased retirements, according to the Watson Wyatt survey, are a poor cousin to other alternative work arrangements, such as part-time (permanent or temporary), work-at-home and job sharing. However, that standing may change. The largest concentration of phased retirement arrangements today is in companies with 5,000 or more employees—11 percent of these companies have employees in phased retirement schedules. Employees in these programs work an average of 20 to 29 hours per week.

Clearly, HR staffing managers may want to consider such alternative options. You can encourage aging boomers with valuable skills, experience and knowledge to extend their work lives, thereby mitigating a staffing disaster. Some of the other benefits include re-energizing older workers suffering from burnout, utilizing boomers as mentors for Generation Xers and decreasing the likelihood of age-discrimination lawsuits.

Ultimately, HR will have to determine whether alternative employment options are right for the organization. But the assessment is well worth the effort. In reaction to "Workforce 2000" projections, a number of private-sector companies already have begun to introduce flexible retirement options. Among them: Aetna, Levi Strauss, Polaroid and Towle Silversmiths. Use these companies as benchmarks—they're leading the way into the next century.

And as boomers demand more work flexibility, they'll also expect flexibility in terms of their retirement benefits. Some companies, therefore, have already begun to change the nature of their pension programs. Here's why.

Redesign pension benefits for portability.
At Princeton, New Jersey-based Rhone Poulenc—a chemical manufacturing company—the majority of its 7,000 U.S.-based workers are baby boomers. "The average age is 44," says Diane Audette, manager of employee benefits, financial and regulatory services. The company recently redesigned its salary, pension and medical plans to meet the needs of the future workforce. "Boomers are an important population. They're key employees, so we didn't want to do anything that would adversely impact them," says Audette.

One major concern of boomers and others is the fate of Social Security. Social Security, which today pays retirement, disability and survivor benefits to 48 million people and collects payroll taxes from 144 million workers and employers, is anticipating a financial crunch when baby boomers begin to retire in approximately 2010. Soon after, the system is expected to be paying out more money than it takes in. Policy-makers, some analysts say, may be forced to raise taxes, reduce benefits paid out or completely revamp the system.

At some point, employers such as Rhone Poulenc will have to consider how much of the burden they're willing to absorb. Who's going to pick up the slack? Will employees be encouraged to collect additional savings to make up the difference? Or will the burden fall on employers?

Meanwhile, Rhone Poulenc's human resources staff is reducing its employees' anxieties by redesigning the pension plans. "During the course of their careers, they can accrue a meaningful benefit. And we're paying the benefits out in a lump sum, which is quite a big change," says Audette. If an individual gave Rhone Poulenc the best 15 years of his or her career and left at age 50, the individual could take a lump sum upon departure. Employees, she says, are attuned to portability, and they also want to control the management of their assets.

You can assist your company's employees by continually providing them with financial training and other useful information about pensions, savings and investments. For example, your employees may find it helpful to think of the retirement income system as a three-legged stool (so described by many financial planners): Social Security, personal savings and employer-sponsored pensions each representing a leg. As the stool destabilizes because of demographic shifts, Social Security facing long-term funding problems and increasing pressures toward employer-sponsored plans, boomers will need to bolster what they can to prop up their retirement stools. Because some studies contend that baby boomers will retire with only one-third of what it would take to achieve a comparable level to their preretirement standard of living, employees should be encouraged to save. One Watson Wyatt Worldwide report concludes the best approach is to expect the worse, save until it hurts and be pleasantly surprised if things turn out to be better than expected.

So whatever form your company's financial training takes, HR's main goal is to educate and evaluate, not just communicate, says Jim Sullivan, of Arthur Andersen Performance & Learning Center in St. Charles, Illinois. Given the dollars invested in such programs, your company should see some return on investment. Properly designed retirement planning education should give your employees the tools to plan, not tell them what to do. By helping boomers plan for retirement, your company is more likely to manage productive and creative workers—while they're still on the payroll.

Workforce, December 1997, Vol. 76, No. 12, pp. 48-53.