The workplace has been transformed forever by the COVID-19 pandemic. The American workforce has dramatically changed the ways they communicate, accomplish essential tasks, and manage others. Roles once reserved for in-person interaction now require new levels of technology and cooperation. We witnessed a transformation that happened in a matter of months.
At the same time, career and retirement goals have changed, too. Employees are living another lifestyle, and what they want now and what they wanted pre-pandemic are very different. Even if their financial circumstances have not changed, we are experiencing a visible shift in employees’ career and retirement goals.
The pandemic is accelerating developments that have already taken a toehold in the workplace. One of these developments is employees’ desire to transition into retirement rather than abruptly stopping work.
Now is an exceptional opportunity for employers to act.
What Is a Late-Career Retirement Track?
A gradual transition from working to retirement offers many benefits, as we’ll see, and should be formally established within an organization as an official, late-career retirement track (also called a phased-in or transitional career track).
Presently, official company versions are practically unheard of. But they should become part of organizational practices and policies. Both employers and employees stand to benefit.
Late-career retirement tracks work by taking an inventory of the company’s knowledge assets, systematically transferring employee wisdom to the next generation, and transitioning veteran employees toward retirement.
The Old-School Way of Retirement Is Ancient History
President Franklin D. Roosevelt signed the Social Security Act into law 80 years ago, and a retirement age of 65 was quickly established. Retiring at 65 years old was practical and realistic at a time when most men and women only lived until around 60. Before the Social Security Act, aging Industrial Age workers with physically demanding jobs would just quit working altogether or sought positions that were less punishing on their bodies.
The old-school way of retirement misses the opportunity to add value to companies and the lives of their veteran employees.
A Modern Solution to an Age-Old Problem
In today’s Information Age, knowledge workers are more likely to want to leave the workforce because they long for freedom and purpose. Life expectancy is now over 78 years old, and retirees today want a life that is active, purposeful, and engaging. That creates a need to prepare for longer retirement periods that could last 20 or 30 years after we stop working.
Longer lives produce lengthier retirements, which have redefined the meaning of “retirement” into a long-lasting and vital period of life.
How Can Employers Benefit from Official, Late-Career Retirement Tracks?
1. Retain valuable human capital, which is less expensive to keep than to create or buy. Information is easy to come by these days, but knowledge is not. When seasoned employees retire suddenly, their knowledge goes straight out the door with them. It’s much easier and cheaper to retain the wisdom of your current team in new ways than it is to train or recruit new talent.
2. Provide an opportunity to reduce overall labor costs. By retaining team members who have more experience, securing their most valuable skills, and partnering them with next-generation talent, companies can get as much, or more, work done at a lower total cost.
3. Improve employee satisfaction and reduce stress. Experienced employees can stay engaged, while next-generation leaders can acclimate to more responsibility over time.
4. Develop employee career tracks that can last far longer and maximize the lifetime value of the investment in their team. A team is an organization’s biggest investment, and it gets more valuable over time.
How Can Employees Benefit from Official, Late-Career Retirement Tracks?
1. Increase flexibility and freedom at work. Most employees don’t necessarily get tired of their work; they get tired of how and when they work. A transitional retirement lets employees continue to do the parts of their job they enjoy while eliminating some of their headaches.
2. Expand working life, which allows for continued contribution. Many retirees long to be valuable and miss being a part of a team’s accomplishments. A transitional program would give these employees the satisfaction of remaining involved with coworkers and projects.
3. Defer withdrawals from retirement savings. The lifestyle retirees lead is predominantly driven by withdrawals from their assets. In a transitional retirement, veteran team members would have a longer “working life” that allows for increased income and the opportunity to delay withdrawing from their retirement assets.
A Way Forward
I know an accomplished marketing executive who didn’t enjoy many of her more ordinary responsibilities but loved the artistic components. After defining the value of her primary wisdom for herself, she approached the company president with a proposal to work from home as a contractor only doing the much-loved artistic parts of her job.
The president happily accepted her proposal rather than replacing her knowledge and skills in that area. This example took place without an established phased-in retirement track.
Now is the time for successful employers to develop an official strategy for a late-career retirement transition before they’re forced to react to it. Companies can undermine themselves by not being willing to accept employees’ new retirement desires.
One thing is clear: The relationship between companies and their employees has been forever changed by the events of COVID-19. We can be proactive in our response to these events and develop meaningful change for our companies and in the lives of our employees.
Chip Munn is a senior financial advisor and CEO of Signature Wealth Strategies. He is the author of The Retirement Remix: A Modern Solution to an Old School Problem and host of The Retirement Remix podcasts. For more information, visit www.chipmunn.com, and connect with Munn on Twitter @chip_munn.