Worker Retirement and the Economy

Thursday, June 24, 2010

For most workers, retirement is about having the ability to retire, which translates into having the necessary financial resources to do so. The pre-boomer generation generally talked about the “three legged stool”. The three legs being Social Security, Employer Sponsored Pension, and Private Savings. Some boomers may still look forward to a “three legged stool” but for most, that Employer Sponsored Pension Plan has been replaced with a matrix of 401(k) plans accumulated over time from various employers. During this last recession, the so-called, “The Great Recession”, numerous organizations discontinued funding the employer matching contributions, further eroding the value of 401(k) accounts. As older laid off workers found themselves unemployed longer, many dipped into their 401(k) accounts to keep afloat in an uncertain recovery and jobs’ market.

While 65 has been the traditional age at which workers retire, in 1983 Social Security was amended to increase the full retirement age for persons born in 1938 or later. This change was attributed to both improvements in the health of older workers and an increase in the average life expectancy of most people. Currently, the “official” retirement age at which workers can receive full Social Security retirement benefits is based on the worker’s year of birth. Beginning for workers born after 1937, the Normal Retirement Age ranges upwards from 65 plus 2 months to age 67 for workers born in 1960 and later. This upward increase in the Normal Retirement Age is not isolated to the United States; European and Asian (Japan) countries faced with mounting debt and declining skilled labor pools are rethinking their traditional retirement age thresholds.

The Baby Boomers, those US workers born in the post World War II period from 1946 to 1964 will begin to retire in 2012 as the first reach the Normal Retirement Age of 66. As they do, employers will be faced with the prospect of finding replacements. The bad news is that many of these workers will take with them decades of talent and experience. The good news is that due to the recent recession and 2 decade’s long shift from defined benefit pension plans to 401(k)’s, many Boomers will opt to work longer. Some will continue in their current trade or profession, while others will enter new trades or professions and even voluntary work. While older workers are often maligned by many, with the right motivation, older workers are highly productive and dedicated, with a wealth of knowledge and skills.

Organizations should consider the formula it is going to take to win in the market place in the coming decade. One term in that formula that will not go away is the continuing shift in globalization of virtually all business processes. A global business often has a large cadre of ex-pat’s with decades worth of knowledge concerning regional markets and resources. Another is the quality of the organization’s products and services; demand for quality is not going to disappear. Many of an organization’s soon to retire workers were on the teams that developed, designed, and deployed those products and services. One driver in globalization is the continuous search for the lowest cost of product development and manufacture. A business’s ex-pat’s often know where and how to locate low cost, high value labor resources and infrastructures are in order to bring products and services to market.

If there can be a bright side to any economic downturn, many employers could be facing the availability of a wealth of skilled knowledgeable older workers with high levels of motivation, dedication, loyalty, and talent.