Retirement Decision Making and

Strategies for Retaining Older Workers

Cheryl Paullin

HumRRO In J.W. Hedge (Chair). Understanding the impact of an aging workforce on

employees/organizations. Panel discussion conducted at the 26th Annual Conference

of the Society for Industrial and Organizational Psychology, Chicago, IL

1

Question

• As employees approach retirement eligibility, what

are some of the issues that affect their retirement

decision?

2

Context

• Many people at or near the age of retirement

eligibility (at least by current social norms)

– But will they? And when?

– 36% expect to retire after age 65 EBRI 2011 Retirement Confidence Survey; N=1,000 U.S. adults age 25+

• Key Qs for many I-O’s

– How do we entice key/productive older workers to

continue working for our organization?

3

Theories of Retirement

• To retain older workers, we must understand and address

the factors that motivate them to stay versus leave

• American Psychologist (April 2011, Vol 66)

– Retirement theories from Psychology and other fields

– I-O Psychology has contributed by examining impact of work and

organizational practices on retirement decisions 4

Retirement is a Process

• Unfolds over time

• Not an all-or-none decision

– Phased retirement

– Bridge employment

– Re-employment

– Volunteer work

• Not an entirely rational decision

• Impacted by factors beyond individual or employer control

– Health of self or loved ones

– The economy and job market

– Changes in laws or government regulations

5

The Retirement Decision

• Am I able to continue working (physically, mentally, emotionally)?

– Average retirement age is low-mid 60’s, even lower in some European countries

– Average life expectancy in developed countries is mid-70’s

• Do I want or expect to continue working?

– 18% - 74% say “yes,” depending on country and survey 2007 AARP-sponsored study conducted by Towers Perrin of 8,200 workers of all ages in 7 developed countries; 2008 AARP

survey of 1,500 U.S. workers age 45-74; 2011 EBRI Retirement Confidence Survey of 1,000 U.S. adults age 25+

– Full time? About half of those who want to continue working say “no” 2008 AARP survey of 1,500 U.S. workers age 45-74 ; 2000 Cornell University longitudinal survey of 600+ workers

age 54-72 in upstate New York

– For this employer?

• Are there strong external reasons to retire?

– To provide care for loved ones

• Elder care as well as dependent care, more often for women than men

– To join a significant other upon his/her retirement

• Many two-earner couples plan or hope to retire at about the same time

– To pursue a dream

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The Retirement Decision (cont.)

• Is it possible for me to continue working?

– Without incurring financial penalties?

• Reduction in benefits for working beyond retirement eligibility or a particular age

– Do I have skills/accreditations that an employer needs?

• Both younger and older workers believe skills decline with age and that older

people can’t learn well

– Some skills do decline, but may be offset by advantages in other areas

(e.g., accumulated knowledge)

– Older workers are very capable of learning, though some accommodation in

the speed or type of training may by required

• Older workers are more likely to stay with their employing organization than

younger workers, so training ROI may be higher for older workers

• Can I afford to retire?

– Do I have sufficient retirement savings or other sources of income to maintain a

reasonable standard of living and to cover rising medical costs?

• Many people don’t, nor do they understand what it will take to support their

preferred lifestyle during retirement

– How would a downturn in the economy impact my savings?

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What Should an Organization Do?

• Conduct workforce audits and track data over time (e.g.,

employee age, key knowledge/skills, attitudes toward older

workers)

– Identify and address key vulnerabilities

• Train managers

– To think of retirement as a process that occurs over time

– To work with older workers who want to stay but need some

assistance to do so

• Create an age-positive organizational climate

– Ask older workers to stay; help them feel valued

– Help younger workers understand that older workers provide value

– Make good use of older worker’s talents and knowledge

8

Questions

• Have specific organizational strategies been

identified as particularly effective for retaining

older employees?

• Are there certain organizational policies that are

particularly detrimental to those same goals?

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Why Retain Older Workers?

Benefits for older workers Accrual of greater lifetime income Potential increase in retirement benefits

upon retirement Access to employer-provided health care

benefits (in some cases) Enhanced physical and emotional well-being Opportunity to continue doing meaningful

work

Benefits for younger workers Access to senior employees’ institutional

knowledge and networks Assess to mentors More hands to do the work

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Benefits for employers Fewer unfilled positions Continued access to key institutional

knowledge and contacts Workers who are motivated and engaged Workers who are productive and reliable Workers who can apply life and job

experience Avoid the need to hire and train

replacements (although older workers may need training to upgrade skills)

Benefits for society Less extensive labor shortages More goods and services can be produced More taxable income available to support

government-provided programs Larger pool of workers contributing to

government-provided retirement programs; smaller pool drawing benefits

Fewer people using government-provided health care benefits (if employers provide coverage)

Decision to Stay with Current Employer

• Top 5 factors older workers considered

– Competitive health care benefits package (61%)

– Competitive retirement benefits package (54%)

– Work/Life balance (35%)

– Caliber of the people with whom I work (28%)

– Recognition for work (27%)

AARP-sponsored study conducted by Towers Perrin (2005), N=1,500 randomly selected

employees 50+ currently working for large U.S. companies

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Decision to Stay with Current Employer (cont.)

• Reasons workers in a phased retirement program

continued working for their career employer

– Enjoyed working (42%)

– Needed the income (28%)

– Needed medical benefits (15%)

– Not yet eligible for pension benefits (5%)

– Other reasons (9%)

Watson Wyatt Worldwide (2004), N=330 U.S. workers age 50-70 currently in a phased

retirement program in several different organizations

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“Helpful” Retention Strategies

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N=8,200 workers of all ages in 7 developed countries. Given a list of practices, indicated

which ones would be helpful in convincing them to continue working. AARP. (2007). Perspectives of employers, workers and policymakers in the G7 countries on the new demographic

realities. Washington, DC: Author. Retrieved July 25, 2009, from

http://assets.aarp.org/rgcenter/econ/intl_older_worker.pdf

Management Practices Used to Retain Older Workers

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Initial Study

Follow-up Study

N=117 organizations from 11 European Union member nations. Most were private-sector,

had more than 500 employees, and in the manufacturing and service industries.

From Taylor, P. (2006). Employment initiatives for an ageing workforce in the EU 15. Luxembourg: Office for Official

Publications of the European Communities. Retrieved July 9, 2009, from

http://www.eurofound.europa.eu/publications/htmlfiles/ef0639.htm

Best Practices: Retention of Older Workers

1. Create an age-positive organizational culture. 2. Provide training to upgrade existing skills or learn new ones. 3. Design or redesign work to make it easier for older workers. 4. Allow for reductions in work hours (e.g., phased retirement). 5. Provide flexibility in work schedules and location. 6. Provide health and wellness programs. 7. Provide health care benefits. 8. Provide opportunities for career or personal growth. 9. Address financial disincentives for continued employment (e.g., partial

or deferred pension payments). 10.Rehire retirees.

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Compilation of strategies across sources. All are supported by more than one

commentator and by survey or research study data.

Particularly Effective Strategies

• Ones that allow individual flexibility

• Most are just as effective for

attracting and retaining younger workers

– Evidence that the organization values their contributions

– Flexibility, flexibility, flexibility

– Health insurance

– Opportunity to do meaningful work and continue to grow

– Less stress

• Shift to a less stressful or less physically-demanding role, e.g.,

trainer or coach

• Work on meaningful special projects

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Detrimental Policies or Practices

• Allowing or failing to address age

discrimination

• Failing to value older workers

– Putting them “out to pasture”

– Discouraging them from participating in skills training

– Making them feel their only role is to transfer their

knowledge to someone younger

• Retirement plans with financial penalties for

working past retirement eligibility

– Government laws and regulations may limit an

organization’s ability to revise or replace such plans

• No health insurance

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References

• American Association of Retired Persons. (2004). Staying ahead of the curve 2004: Employer best practices for mature

workers. Washington, DC: Author. Retrieved February 19, 2009, from

http://assets.aarp.org/rgcenter/econ/multiwork_2004.pdf

• American Association of Retired Persons. (2005). The business case for workers 50+. Washington, DC: Author.

Retrieved June 24, 2009, from http://assets.aarp.org/rgcenter/econ/workers_fifty_plus.pdf

• American Association of Retired Persons. (2007). Perspectives of employers, workers and policymakers in the G7

countries on the new demographic realities. Washington, DC: Author. Retrieved July 25, 2009, from

http://assets.aarp.org/rgcenter/econ/intl_older_worker.pdf

• American Association of Retired Persons. (2008). Staying ahead of the curve 2007: The AARP work and career study.

Washington, DC: Author. Retrieved July 25, 2009, from http://assets.aarp.org/rgcenter/econ/work_career_08.pdf

• American Psychologist (2011). Special Section on Retirement. Vol 66 (April).

• Byham, W.C. (2007). 70: The new 50. Pittsburgh, PA: DDI Press.

• Employee Benefit Research Organization. (2011). The 2011 Retirement Confidence Survey. Retrieved April 10, 2011,

from ww.ebri.org/surveys/rcs

• DeLong, D. W. (2004). Lost knowledge: Confronting the threat of an aging workforce. Oxford, England: Oxford

University Press.

• Eyster, L., Johnson, R.W., & Toder, E. (2008, January). Current strategies to employ and retain older workers.

Washington, DC: Urban Institute. Retrieved April 24, 2009, from http://www.urban.org/publications/411626.html

• Hedge, J.W., Borman, W.C., & Lammlein, S.E. (2006). The aging workforce: Realities, myths, and implications for

organizations. Washington, DC: American Psychological Association.

• Goldberg, B. (2000). Age works: What corporate America must do to survive the graying of the workforce. New York:

The Free Press.

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References (continued)

• Mermin, G.B.T., Johnson, R.W., & Toder, E.J. (2008, July). Will Employers Want Aging Boomers? (Discussion paper

08-04). Washington, DC: Urban Institute. Retrieved April 24, 2009, from http://www.urban.org/publications/411705.html

• Naegele, G., & Walker, A. (2006). A guide to good practice in age management. Luxembourg: Office for Official

Publications of the European Communities. Retrieved July 9, 2009, from

http://www.eurofound.europa.eu/pubdocs/2005/137/en/1/ef05137en.pdf

• Rappaport, A, Bancroft, E., & Okum, L. (2003). The aging workforce raises new talent management issues for

employers. Journal of Organizational Excellence (Winter), 55-66.

• Shultz, K.S., & Adams, G.A. (Eds.) (2007). Aging and work in the 21st century. Mahwah, NJ: Lawrence Erlbaum &

Associates.

• Taylor, P. (2006). Employment initiatives for an ageing workforce in the EU 15. Luxembourg: Office for Official

Publications of the European Communities. Retrieved July 9, 2009, from

http://www.eurofound.europa.eu/publications/htmlfiles/ef0639.htm

• US General Accountability Office (2007). Older workers: Some best practices and strategies for engaging and retaining

older workers (Statement of David M. Walker, Comptroller General of the United States, Testimony before the U.S.

Senate Special Committee on Aging; GAO-07-433T). Washington, DC: Author. Retrieved January 15, 2009, from

http://www.gao.gov/new.items/d07433t.pdf

• US General Accounting Office. (2001). Older workers: Demographic trends pose challenges for employers and workers

(Report to the Ranking Minority Member, Subcommittee on Employer-Employee Relations, Committee on Education

and the Workforce, House of Representatives; GAO Report No. GAO-02-85). Washington, DC: US Government

Accountability Office. Retrieved January 15, 2009, from http://www.gao.gov/new.items/d0285.pdf

• US National Institute on Aging. (2007). Growing older in America: The Health & Retirement Study (NIH Publication No.

07-5757). Washington, DC: Author. Retrieved July 25, 2009, from http://www.nia.nih.gov/ResearchInformation/

ExtramuralPrograms/BehavioralAndSocialResearch/HRS.htm

• Villosio, C, DiPierro, D., Giordanengo, A., Pasqua, P., & Richiardi, M. (2008). Working conditions of an ageing

workforce. Luxembourg: Office for Official Publications of the European Communities. Retrieved July 9, 2009,

http://www.eurofound.europa.eu/pubdocs/2008/17/en/2/EF0817EN.pdf

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