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There is no denying that the workforce in the U.S.
is growing older. Baby boomers are approaching
retirement age, and the effects on both
organizations and individuals are beginning to be
felt. Unfortunately, neither organizations nor
boomers seem to be preparing for this.
According to the chart on the right, we are seeing
the average age of the workforce
rise. Between now and 2015, the highest growth rate
in the workforce will be among workers ages 55 to
64, with a dearth of younger workers to replace
them. This trend is likely to create huge worker
shortages if employers don't find ways to hold on to
their older employees, according to a survey done by
AARP.
As the average age of the workforce rises, companies
will face a tremendous job-mapping challenge. Job
mapping matches jobs to people based on tenure and
experience. So, as the workforce ages, it will
become more and more out of sync with matched jobs
unless employers redefine job mapping in light of
real-world demographics. According to the chart
below, growth in employment will dip into negative
growth soon.
Companies should look at health benefits and
pensions in relation to their aging workforce.
Companies can be damaged when these employees are
not retained properly. When organizations get in
tight corners, they let elderly workers go under
favorable circumstances, but it leaves great holes
in the knowledge base and experience of the
organization – a loss of corporate memory. HR
professionals should consider the forecasts and look
at their practices with regard to their mature
workforce. Evaluating job sharing, flexibility,
health care and other benefits will be critical as
the workforce gains in years.
A survey released by AARP indicates a record number
of workers plan to remain in the labor force well
beyond the "normal" retirement age. Jeff Love,
director of research at AARP has said that this is
something the organization has never seen before.
"Nearly half [45 percent] said they were going to
work into their 70s or later!"
The reasons for this vary. Almost 22% of the workers
have said that it’s because of money. For years we
have heard about the lack of savings in the U.S.,
and now it’s coming home to roost. As companies move
away from defined benefit pension plans and towards
401k plans, the onus is on the individual to provide
for their retirement. The recent wave of downsizing
severely affected many retirement plans as people
lost jobs before their plans vested.
Four trends affecting individual retirement programs
include:
Increased life expectancy – Medical advances
are helping to raise life expectancy projections.
The amount of time your retirement money needs to
last is growing every year.
Rising cost of healthcare –While healthcare
advancements enable us to live longer lives, they
also mean that you will likely be spending more on
healthcare than you initially planned.
Evolution of corporate retirement plans –
Traditionally, defined benefit pension plans
guaranteed retired employees a certain level of
income for life. These plans are gradually being
replaced by plans that transfer much of the
responsibility and the risk of retirement investing
away from employers and onto employees.
Social Security uncertainties – As the baby
boomer generation leaves the work force, the Social
Security system will come under strain. Far fewer
workers will contribute to the system and many more
recipients will be drawing benefits.
The impact of these trends will affect how workers
will plan for their retirement. Besides working
longer before retiring, individuals should consider
the following:
First, individuals--rather than the pension plan
sponsor--increasingly will have to manage their
retirement assets and bear the risk of
investment losses.
Second, since most retirees' non-Social Security
retirement income will be distributed as a lump
sum or in periodic payments (from a defined
contribution plan or IRA) rather than as a
regular paycheck for life (from a defined
benefit plan), retirees will need either to
purchase an annuity from an insurance company or
carefully manage their individual rate of
spending in order to avoid outliving their
assets.
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