They say three’s a crowd, so what will they say when five generations work together? Millennials are on their way in, but Boomers are in no hurry to make their way out. In fact, American workers are increasingly putting off retirement. And that has major implications for workforce planning as organizations struggle with the diverse needs and abilities that define each generation.
Blame it on the “busted generation.” An astonishing 43 percent of Americans over age 55 have less than $25,000 saved for retirement, according to the Employee Benefit Research Institute. At the same time, a 65-year-old couple will need $240,000 for healthcare alone in their retirement, says a recent Fidelity study.
Clearly, many Americans will have to stay in the workforce past age 65. In fact, two decades ago the average retirement age was 57. Today, the typical retirement age has crept up to 61, Gallup reports. Most employees now expect to work till age 66, and more than 60 percent are concerned about funding their retirements.
That means employers will have to manage five generations of workers: Traditionalists, Boomers, Gen X, Millennials, and Gen 2020. In particular, they’ll need strategies for minimizing the downsides and maximizing the upsides of employing the over-65 set.
The Good, the Bad, the Aged
Organizations face several downsides as workers delay retirement. First is higher costs for healthcare benefits. Older workers are simply more expensive to insure. Although they incur lower costs for childbirth, accidents and substance abuse than their younger counterparts, the severity of their claims is higher per incident.
Second is reduced development opportunities. Older employees are less likely to further develop their careers. And as they remain in the workforce, they slow your succession plans.
And third is higher attrition for young workers. With older workers lingering in available job slots, younger workers will tire of waiting for advancement opportunities. That means they’ll be more likely to jump ship. While your overall attrition rates may not change, the number of younger (and cheaper) employees leaving may surge.
On the other hand, there could be some positive implications as employees wait longer to retire. One is a deeper pool of experience. Workers’ delaying retirement means you can leverage their rich experience longer and avoid a brain drain.
Another is an abundance of mentors. A larger workforce of experienced employees gives you more opportunities to help onboard and develop future generations.
A third advantage is greater flexibility. Many older workers are interested in part-time or contractual assignments. These experienced and culturally adapted employees can become a valuable part of your contingent workforce.
Finding the Silver Lining
Whether positive or negative, your growing ranks of 65-and-older employees call for new and innovative HR approaches. If your organization expects more workers to delay retirement, consider these strategies:
- Analyze your workforce: Some organizations have already shifted to a workforce largely composed of Millennials. The majority, though, still have a more seasoned workforce. Do you understand what your workforce will look like over the next five years? If not, conduct a thorough workforce analysis to identify your risks. Then plan accordingly. And communicate your findings to your management team.
- Offer more flexibility: All generations of workers want flexible worker arrangements, according to a survey we conducted for The 2020 Workplace. Consider offering opportunities for part-time, contractual and seasonal work, as well as the ability to work from any location. This will allow older workers to ease into retirement. It will also open up opportunities for younger generations of employees.
- Develop managers’ skills: Finally, make sure you’re developing your managers to work with a highly diverse workforce — a clear requirement going forward. And note that it will be increasingly likely that older workers are managed by younger managers, so start management training early. The average age of first-time training for new managers was 42, even though they typically had been managing people since they were 30, according to a study by talent-management company Zenger/Folkman. You need a clearly defined curriculum for each level of management to ensure your management team is prepared to oversee a changing workforce.
The workforce will change as more and more employees delay retirement. Your workforce planning will have to adapt along with it.