The “Baby Boom” is still having an impact on the workplace despite its advancing age, with an increasing number from that generation staying in the workforce longer than the “normal” retirement age. And that has implications for employers, retirement saving, and retirement plans.
Extended Tour of Duty
Edge Research examined this trend in “Employment Extenders: A (labor) Force to Be Reckoned With,” a study commissioned by Voya Cares and Easterseals. Edge Research surveyed 1,062 “employment extenders,” half of whom were adults age 50 and older who previously retired from one career but are working at another job, and half of whom were adults age 65 or older and are working beyond retirement age or plan to.
John Lowell, an actuary and partner at October Three, has observed this phenomenon. “There certainly are more people” at or beyond the “normal” retirement age who are working than were before, said Lowell in an interview with ASPPA Connect.
Jessica Tuman, head of Voya Cares Program Center of Excellence and Environmental, Social, and Governance at Voya Financial, told ASPPA Connect that based on their research, they have developed persona groups among employment extenders. These groups, whose motivations help explain their lingering presence, include:
- Want to Work: The most important reason for the “want to work” group to work longer is that it gives them a sense of purpose.
- Working Longer by Design: Their most important reason for working is that they want to be more financially stable for a better quality of life in retirement compared to just needing it. Retiring later has always been part of the plan.
- Need to Work and Worriers: These two groups are working longer because they need the finances to cover expenses now or in retirement—in fact 92% of individuals in these two groups indicate this need as a reason. The main difference between these two groups is that “worriers” have the resources, tools and opportunity to get prepared to retire, after working longer, while “need to work” employment extenders have an uphill road ahead of them.
Why?
There are a variety of reasons pre-retirees linger in the workforce.
Demographics. “We’ve seen the growing trend of an aging population over the past two decades,” says Tuman. She continued, “At the same time, the Bureau of Labor Statistics has been documenting that this aging population is working beyond the traditional retirement age: one-third of individuals ages 65 to 74 expect to be working in 2030 and the greatest growth in our labor force will come from workers aged 75 and over.”
Re-evalation. The Voya study says that the pandemic elicited reevaluation among many regarding where work fits in their lives, and notes that research by multiple sources reported finding significant numbers of workers who were reconsidering their employment and where it should take place. Tuman says, “We now see some employers mandating a return to the office, which has prompted many employees to re-evaluate the role of work in their lives. Many individuals continue to see telework and remote work as something that can help them balance things in terms of work and family. In fact, some of our own research at Voya has found that 59% of employed Americans are more likely to stay with their current employer if offered the ability to work remote or hybrid.
Lowell expresses a similar view. With the pandemic, he says, the workforce went from some work being done remotely to most work being done that way, and there are employees who like the ability to work from home without having to commute—and work on their own terms.
The economy. Economic instability and inflation figure as well, says the Voya study, and is evoking recalculations about retirement. For instance, they suggest, these factors encourage additional saving. “Overall, the tendency to keep working has increased, while the reasons to stop have decreased for many older Americans,” says Voya.
How “retirement” is defined. MassMutual in its 2024 Retirement Happiness Study suggests an additional factor behind the changing mentality regarding when to stop working is the definition of “retirement.” They suggest that it is coming to encompass more than just no longer working. They found that a majority of the pre-retirees in their study regard retirement as either (1) changing focus to ‘a new type of work or fulfilling purpose’ or (2) working less.
Financially unprepared. Most employment extenders indicated to Edge Research that they had not saved sufficiently for retirement; while a majority of respondents said they were working longer because they wanted to, “in fact, many are doing so out of necessity.”
MassMutual reports something similar. They report that 35% of pre-retirees told them their retirement savings are not where they should be if they are to retire at an ideal age, and almost as many—34%—told them they think they might outlive their money. Also, Clever found in its 2024 study that 40% of retirees are concerned about the same thing; further, and more serious, 46% told them they have no plan if their savings run out. And Lowell says there are people who tried retirement but found that they could not afford it.
Members of the Baby Boom generation face grim financial circumstances, says Clever. “Boom to bust” is how they describe their circumstances, because they must contend not only with increasing expenses, but also debts to cover. Lowell notes that one of the changes the pandemic occasioned is “way more credit card debt than before.” That figures in the phenomenon of older employees extending their time in the workforce, he says, in part because there are people who use a significant part of their income to cover that debt.
“Our research found two basic motivations for working longer: because they want to and because they need to. But of those employment extenders who say they are motivated to continue working because they either can or want to, a majority (92%) also indicate they need or want more money for retirement,” says Tuman.
Implications for Retirement Plans and Saving
Lowell warns that the economic stresses that many older employees face pose challenges for their retirement readiness. “As life expectancy increases, employment extenders need to accumulate more retirement savings, and they have a shorter period to do it. Only 37% of employment extenders have plans in place to be sure they do not outlive their savings, leaving a clear opportunity for education on the topic,” adds Tuman.
“Everybody should have the opportunity to participate in a 401(k),” says Lowell, but he adds that employers may want to go beyond that as well.
Tuman makes a similar argument, suggesting that “Retirement plan design can benefit employment extenders with retirement options offering guaranteed streams of income.” She continues, “opportunities for employment extenders to reinvest their unique streams of retirement income—such as pensions from a previous employer, required minimum distributions or even Social Security retirement payments—could be beneficial.”
Tuman also suggests emphasizing the importance of protecting the integrity of retirement savings that have accumulated, saying that they would “encourage employment extenders to stay away from accessing their retirement savings until they retire. Just because penalty-free withdrawals are allowed after age 59 ½, doesn’t mean a retirement account turns into a bank account. Similarly, stay away from hardship withdrawals from retirement savings. Starting an emergency savings account, perhaps through an employer that will allow for payroll deduction, can help to keep retirement savings intact, even during difficult times.”
Action Steps
Older employees need support, and Voya says that the best way to do that may be to provide compensation and benefits that meet their needs and help them to shift into retirement. Tuman posits that for employers, “thinking about how to provide education, programs and benefits for this segment as part of their human resources strategy and overall workplace benefits and savings package is important.”
Retirement benefits. Voya suggests offering benefits that will be especially helpful to people of their age and stage in life. PeopleKeep indicates this may resonate: They report that 86% of their respondents who are Baby Boomers consider retirement benefits to be very or extremely important.
“Employers that want to be ‘employers of choice’ will offer some automatic employer-provided benefits,” says Lowell; for instance, they could consider offering a defined benefit plan, profit sharing, or an employee stock ownership plan. Tuman suggests that employers can provide employment extenders with opportunities to make catch-up contributions to their retirement plans and IRAs, Roth IRAs, or other Roth accounts.
Education. Tuman told ASPPA Connect, “For employers, it’s important to note that one of the most pervasive needs that this group expressed is the interest in education and guidance in the following areas:
- help transitioning to retirement;
- how to maximize benefit dollars across health and wealth benefits; and
- estimating income needs in retirement.
Communication. “It’s all about communication,” says Lowell, who argues that employers should provide employment extenders “with the information they need” and help show them how they can use their funds effectively and efficiently. “Targeted communication on how existing employee benefits can help meet their unique needs may be all that is needed,” says Tuman.
And, Lowell notes, employers that do so “tend to have happier employees.”
The Bigger Picture. “What is so striking about the needs of employment extenders is that the solutions can be beneficial to employees of all ages,” says Tuman.
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