Broker Check


Client Centered

How does delayed retirement impact a business?

Written by Tom Nickol

Employees moving into the last phase of their careers struggle with the question of when to retire.  Social and emotional factors are important.  However, the economic reality of knowing with certainty if enough funds have been saved is likely to be the most pressing concern.  Businesses should be more aware of a trend for employees to delay retirement and the impact on their organization.

CFOs have suspected for some time that those employees who delay retirement beyond what is considered a normal age carry an expense to the organization.  The largest expense by far is healthcare.   Insurance rates for older employees can be several times more costly than those for the younger, replacement employees.  The same is true for Workers Compensation premiums.  Earnings for an older employee are likely going to be higher than the pay for a younger one.   

Few have quantified precisely the cost of delayed retirement.  In the past few years, studies by Prudential and Viability have estimated the range to be between $35,000 and $50,000 per year for each employee who delays their retirement.  Depending on the demographics of the workforce, this can be a substantial future liability.

Should employers consider making plans to reduce their gray workforce?  Hardly!  Besides the ethical and legal issues, factors beyond expenses should not be ignored.  These individuals are valuable employees and contribute to the success of the business.  They have experience, and typically have an excellent work ethic. Experienced employees are mentors, they are efficient, and have relationships with customers that are extremely valuable. 

How should an organization approach their associates’ retirement?  Recognize that working a plan that is consistent with the long term strategic goals of the business is the first place to start.  Think in terms of a succession plan.  Many organizations have a succession plan for the CEO.  Why not one for each employee?  Such a strategy benefits the business as well as the employees.

See this article for a discussion of strategies:  Three Ways Plan Sponsors Can Reduce Delayed Retirement Costs

Last reviewed 6/1/2022

Everyone has a risk number. . .what’s yours?

Click below to get your risk number.

Have a Question?

Thank you!