The 2008 Recent Retirees Survey was sponsored by the Employee Benefit Research Institute (EBRI) to better understand the tools and practices that might encourage workers to postpone their retirement and remain longer with their company.
It finds that retirees typically retired from employers for one of four reasons: retirement becomes affordable, lack of job satisfaction, a desire for more personal or family time, and/or their health status.1 One of the major findings of the survey is that employers have a narrow window of up to two years in which they may be able to intervene to change retiring workers’ decisions by offering them incentives to remain with the company. Although no single incentive is likely to motivate a majority of retirees to stay longer with their employer, it appears that employers may be able to assemble a toolkit of alternatives that would be effective in retaining substantial numbers of workers at retirement age.
Among the key findings of this survey:
1. Many retirees report they would have been open to an approach from their employer asking them to stay longer with the company. 61% say they would have viewed the experience positively. Just 10% indicate they would have reacted negatively to an approach asking them to delay their retirement.
2. The survey tested a total of 19 possible incentives that might encourage retiring workers to postpone retirement. Four of these appear especially likely to be successful:
a. Half of retirees (48%) indicate that feeling truly needed for an assignment would have been extremely or very effective in encouraging them to delay their retirement. Moreover, of those ranking this as one of the top two most effective incentives, 72% say it might have prompted them to stay at least two more years with the company.
b. Half of retirees with a defined benefit pension state receiving a full pension while working part time would have been effective in delaying their retirement (50%), and almost as many feel this way about receiving a partial pension while working part time (44%). Seven in 10 of those rating each among the top two most effective incentives report they would probably have stayed at least two more years if it had been offered to them (72% for full pension, 71% for partial pension). However, this would necessitate a change in federal law and several other compensation-related incentives noted below may be almost as compelling.
c. 38% report that being able to work seasonally or on a contract basis would have been effective in encouraging them to delay retirement. Among those rating this as one of the top two incentives, more than three-quarters (77%) say it might have prompted them to stay with the company two years or more.
3. Other highly rated incentives include a pay increase (33% of all retirees say it would have been effective, 56% ranking it among the top two most effective incentives might have stayed two years or longer); continuing to receive company subsidized health insurance benefits at the same level as full-time workers while working part time (46% effective, 56% two years or longer); doing more meaningful work (36% effective, 67% two years or longer); locking in pension benefits that were already earned (42% of those receiving pension effective, 54% two years or longer); telecommuting (28% effective, 68% two years or longer); and being able to work part time rather than full time (36% effective, 64% two years or longer).
4. The timing of the offer of a delayed retirement incentive is important. Nearly two-thirds of retirees (63%) report that these offers would have been a lot more effective if the retiree had known about the possibility in the two years before they communicated their intention of retiring.
5. In general, workers begin thinking seriously about retirement not long before they actually retire. 22% of the surveyed retirees first began thinking seriously about retiring only six months before they left the company, while another 22% began thinking seriously about it aproximately a year beforehand. 28% started thinking about it 18 months (10%) or two years (18%) before.
6. One of the primary reasons that aerospace and defense industry company workers retire when they do is because retirement becomes affordable (76% rate it as extremely or very important). The two other reasons for retiring mentioned by a majority of retirees are their job satisfaction (63%) and a desire for more personal or family time (60%). Almost half (46%) say their health was an extremely or very important factor.
7. 36% of retirees with a pension report that a pension-related issue was an extremely or very important factor in their decision to retire. Among those saying this reason was at least somewhat important, 72% indicate that reaching the pension eligibility age was important in their retirement decision. In addition, 46% say they wanted to lock in the benefits they received so that they would not have to worry about changes the company might make. This suggests that some workers may be making retirement decisions based on erroneous assumptions since employers cannot legally reduce pension benefits for past service.
8. While a majority (54%) was either extremely, very, or somewhat satisfied with their job at the time they made their decision to retire, a sizable minority (46%) indicate they were not too or not at all satisfied. A number of factors appear to contribute to decreased satisfaction among this minority, including not feeling valued by the company or feeling that the work did not have long-term value (64% rate it a ‘4’ or ‘5’ on a 5-point scale), stress (47%), no longer growing or learning (45%), and not enjoying work (45%). In addition, not getting along with co-workers or not sharing their values (30%) appears to be associated with increased levels of dissatisfaction.
2. The Retirement Decision
Reasons for Retirement-Workers of aerospace and defense industry companies retire for many different reasons. Foremost among these reasons, however, is that retirement becomes affordable. Three-quarters of retirees (76%) report that their ability to afford retirement was an extremely or very important factor in their decision to retire. Two other factors are also mentioned by a majority of retirees as reasons for retiring: their lack of job satisfaction (63% extremely or very important) and a desire for more personal or family time (60%) (Figure 1).
Nearly half (46%) say that their health was an extremely or very important reason for their retirement, while roughly one-third each indicate that a consideration related to their pension (36% of those with pension), a desire to do something different (32%), and the health of a spouse or another family member (31%) played a major role. Fewer report that other factors, such as their spouse’s retirement status (20% of married respondents), an early retirement incentive (10%), and other career opportunities (8%), were important.
Figure 1: Factors in Retirement Decision
Source: Employee Benefit Research Institute, 2008 Recent Retirees Survey.
Overall, the propensity to say each reason is important tends to increase with the amount of time spent deliberating the retirement decision and the number of years spent working for the company. It also tends to be higher among those saying their health was a reason for their retiring than among those who did not cite their health.
In addition, the propensity to report each reason as important is generally higher among those at least somewhat satisfied with their job than among those not satisfied. There are several notable exceptions, however. First, the likelihood of citing job satisfaction as an important factor in their retirement decision increases sharply as job satisfaction decreases, from 29% of those extremely or very satisfied to 96% of those not at all satisfied. In a similar but much less extreme fashion, those satisfied with their job are less likely than those who are not to indicate that other career opportunities were important (6% extremely/very satisfied vs. 12% not at all satisfied). Finally, the desire to do something different was more often rated highly by retirees somewhat or not too satisfied with their job (36%) than by those extremely or very satisfied (27%) or those not at all satisfied (30%).
Retirees who do not work for pay in retirement are more likely than their counterparts who do work for pay to give the following reasons were important in their decision to retire: their ability to afford retirement (80% vs. 64%), a desire for more personal or family time (64% vs. 49%), their health (49% vs. 38%), the health of a spouse or family member (33% vs. 24%), and their spouse’s retirement status (23% vs. 14%). On the other hand, those who worked for pay more often report that factors playing an important role were their job satisfaction (66% vs. 62%), a desire to do something different (35% vs. 31%), and other career opportunities (22% vs. 4%). Moreover, larger shares of those who worked for an aerospace/defense industry competitor in retirement than those working somewhere else indicate their job satisfaction (72% vs. 64%), a consideration related to their pension (43% vs. 34%), and other career opportunities (33% vs. 17%) were important.
Married women are approximately three times as likely as married men to give weight to their spouse’s retirement status when considering their retirement decision (45% vs. 16%). Women are also more likely than men to say a desire for more personal or family time was important (64% vs. 59%), but less likely to mention other career opportunities (5% vs. 9%). Those who retired before age 58 are more likely than those retiring later to cite a desire to do something different (36% vs. 30%) and other career opportunities (13% vs. 7%).
Dallas Salisbury is president and CEO of the Employee Benefit Research Institute. The full report by a group of authors is available at www.ebri.org as the July 2008 EBRI Issue Brief Number 319. Thus summary is an extract.
1 It should be noted that the population for this survey was drawn from companies within the aerospace, defense, and national security industries and focused on engineering and technical workers. This means the sample is somewhat atypical of the ‘average’ private-sector worker: Levels of education, training, and pay are higher than average, and pension recipiency is much higher than average in this sector. Also, a significant factor in this industry is the need for government security clearances for the vast majority of workers (since defense and aerospace projects are generally classified). This can have a significant effect on job requirements, working conditions, and pay. The time it takes to hire new workers, the level of skill needed, the difficulty of obtaining security clearances, and the need to facilitate the gradual transfer of institutional knowledge are reasons why employers may want to retain older workers, particularly those eligible for early retirement. Nevertheless, many of the factors identified within this group of workers have obvious relevance to the work force at large and other employers looking to retain older, experienced, or skilled workers.
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