Addressing the Desire to Work Past Age 65

Transamerica Center for Retirement Studies’ (TCRS) 19th annual retirement survey, “Employers: The Retirement Security Challenge,” focuses on the need for workers with greater longevity expectations to remain in the workforce longer than previous generations.

“We are looking at this issue in multiple ways,”  Catherine Collinson, CEO and president of TCRS and the Transamerica Institute, tells PLANSPONSOR. “As people live longer, we need to rethink the amount of time spent in the workforce and in retirement. Mathematically speaking, it is challenging for workers to spend 40 years in the workforce and save enough to last a retirement of 20, 30—or even 40 more years.”

So many workers haven’t saved enough to fully retire at age 65, Collinson continues. “The natural solution is to extend their working lives, so we have made time-in-workforce a broader emphasis of our survey work. That is a very important part of the financial equation.”

The survey found that not all employers think their workforce will be able to achieve a financially secure retirement. Seventy-one percent are confident in this scenario, including 17% that are very confident and 54% that are somewhat confident. In contrast, 64% of workers are confident they will be able to fully retire with a lifestyle they consider comfortable, including 18% who are very confident and 46% who are somewhat confident. The median age workers expect to live to is 90.

While 75% of employers consider their companies to be “aging friendly,” for example by offering flexible work arrangements and training for workers of all ages to be successful, only 54% of workers think their companies have adopted these policies.

Collinson says that a survey of retirees that Transamerica conducted late last year found that more than half retired earlier than they had planned to. “Diversity in the workforce, including age diversity, is extremely important,” Collinson maintains. “This is a major paradigm shift for employers. They will need to change their thinking about when and how people retire.” She says there is actually a need for companies to retain their Baby Boomer workers because there are fewer workers in the workforce to replace them.

Collinson says employers should consider offering Boomers a phased retirement starting with part-time or seasonal work. The survey found that only 26% of employers have adopted a formal diversity and inclusion policy statement that includes age among other commonly included demographic characteristics.

“A multigenerational workforce is something people have begun talking about over the past 10 years,” Collinson says. “I have had the privilege to work with multigenerational teams over the course of my career, and the level of collaboration is inspiring and rewarding. There is a movement afoot to raise awareness of the need for this diversity.”

In fact, the survey found that 69% of employers say many employees at their company expect to work past age 65 or to not retire at all. Among workers, 53% plan to work past age 65 or to never retire.

Seventy-seven percent of employers say their company is supportive of employees working past age 65, but only 77% of workers believe this to be the case.

Twenty-seven percent of workers envision working fewer hours, and 16%, in a different capacity. Only 22% plan to immediately stop working and fully retire.

There is work to be done in this area among employers, Collinson says, as only 38% of employers offer flexible work schedules, only 30% permit workers to move from full-time to part-time work, and only 23% encourage their employees to participate in succession planning, training and mentoring.  Seventy-five percent of employers do not offer a formal phased retirement program for workers who want to transition into retirement.

Employers think that age 70 is too old to work, while workers say it is age 75.

Collinson says addressing the needs of older workers should include retirement income solutions. “It would be terrific if plan sponsors were comfortable with offering this in various forms, including guaranteed income for life, but in the absence of this, simply offering education and planning resources on retirement income can go a long way towards solving the problem,” she says.

The State of 401(k) Plans

The survey also explored the state of 401(k) plans among employers. Seventy-seven percent of employers think offering a 401(k) or similar plan is important for attracting and retaining employees, but only 65% offer such a plan. Among those offering a plan, the reasons they give are the following: helping employees prepare for retirement (59%), retaining existing employees (59%), offering a competitive benefits package (55%) and increasing employee job satisfaction (54%).

Sixty-five percent of employers work with a retirement plan adviser. Among those who are not offering a retirement plan, only 31% say they are likely to do so in the next two years. Among those offering a plan, only 46% extend it to part-time employees. Fifty percent of workers say their primary source of retirement income will come from self-funded savings such as a 401(k). Among those who are offered a plan, 77% participate in it. Eighty-eight percent of employers offer a company match.

Only 21% of sponsors in the survey have adopted automatic enrollment, with the median default rate being 5% of pay. Among those with automatic enrollment, 51% also have automatic escalation. Eighty-eight percent of workers say automatic enrollment is appealing.

Eighty-three percent of employers offer a target-date fund, a target-risk fund or a managed account. Twenty-eight percent of workers have taken out a loan from their 401(k) or similar plan. Among those who have, the most common reason is to pay off debt (34%), followed by to deal with a financial emergency (23%) or unplanned major expense such as a home or car repair (20%).

Workers’ estimated median total household retirement savings is $50,000.