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3. Delaying Retirement

Current Approaches — Currently, only about one-quarter of workers retiring from the aerospace and defense industry (26%) are approached and asked to delay their retirement. These approaches are typically made by the worker’s supervisor (79%) rather than another executive in the company (33%) or someone from human resources (7%).
The majority of retirees who report an approach say that no incentives were offered to delay their retirement (72%). However, modest percentages indicate they were offered a move to part-time status (9%), a pay increase (7%), or increased flexibility in scheduling working hours or time off (6%).
Seven% of those approached report they delayed their retirement as a result. However, these retirees delay their retirement for a median (midpoint) of only six months. Surprisingly, although retirees who were at least somewhat satisfied with their job are more likely to have been approached than those who were not satisfied (30% vs. 21%), both groups are equally likely to have delayed their retirement when asked (7% vs. 6%).
Nevertheless, retirees say they are open to such an approach and many would view the experience positively (61%) (Figure 2). Just 10% indicate they would react negatively to an approach asking them to delay their retirement and only 29% say they would be neutral. Even among those who were not satisfied with their job, only 14% state they would have reacted negatively to such an approach.

Figure 2: Reaction to Request to Delay Retirement

Source: Employee Benefit Research Institute, 2008 Recent Retirees Survey.

Retirees more likely to say they would react positively to an approach asking them to delay retirement include those who worked for pay in retirement (67%, compared with 59% who did not), those who were not asked to delay retirement (64%, compared with 51% who were), and men (62%, compared with 56% of women). In addition, those with income replacement levels under 60% are more apt than those with higher replacement to say they would have reacted very positively (28% vs. 23%).
Most Effective Opportunities — When retirees are asked which of the opportunities presented would be most effective at encouraging them to delay retirement, they most often say feeling truly needed for an assignment (29% say it is one of the top three most effective, 12% say it is the most effective). Other incentives that retirees rank highly are receiving a full pension while working part time (24% top three, 9% most), a pay increase (22% top three, 7% most), continuing company-subsidized health insurance at the same level as full-time workers (21% top three, 5% most), and receiving a partial pension while working part time (21% top three, 6% most). No other incentives were ranked among the top three by 20% or more of retirees.
Although the data demonstrate a positive relationship between job satisfaction and most retention incentives, there is an inverse relationship between job satisfaction and the incentives of feeling truly needed for an assignment and doing more meaningful work. That is, as job satisfaction decreases, the likelihood of responding to these two incentives increases. Conversely, as job satisfaction increases, the effectiveness of these factors decreases.
An alternate measure of incentive effectiveness would be how much longer retirees remain with the company when offered these incentives. Using this measure, three-quarters of retirees ranking each opportunity as most or second-most effective say they might have stayed with the company at least two more years if they had been offered training that would have enabled them to move into new areas of the company (79%) or had been offered seasonal or contract work (77%). Large percentages of those rating an assignment where they feel truly needed (72%), receiving their full pension while working part time (72%), and receiving a partial pension while working part time (71%) as most or second-most effective also say they would probably have stayed at least two more years with the company. Roughly two-thirds might have stayed this much longer if they had been able to change their position to decrease their management responsibilities (69%), had the option to telecommute (68%), do work they felt was more meaningful (67%), and part-time work instead of full-time work (64%).
Although at least half of retirees rating most of the other options as most or second-most effective think they might have stayed two years or longer, fewer believe they would have stayed this long if they had been able to shift their work hours from week to week (40%), received additional paid time off each year (35%), or received a one-time cash bonus (32%). It should also be noted that 8% of retirees report they would not have stayed any longer with the company even if they had been offered the incentive they rated as most effective.
However, a more effective measure of incentive effectiveness might combine the previous two, weighting the percentage of workers likely to stay two years or longer by the percentage likely to give the offer the most serious consideration. Using this weighted index,² it appears that the most effective incentive would be feeling truly needed for an assignment (index of 17), followed by receiving a full pension while working part time (13), receiving a partial pension while working part time (10), and seasonal or contract work (10) (Figure 3). Other effective offerings might be a pay increase (9), providing part-time workers with health insurance benefits at the same level as full-time workers (8), and more meaningful work (8).
While no single incentive is likely to persuade a majority of retiring workers to remain longer with the company, it is likely that a carefully constructed package of incentives could persuade a substantial number to delay their retirement. Based on the survey results, however, about half of retirees would likely stay two years longer with the company if they were offered a choice of one of the following options: an assignment for which they feel truly needed, a pay increase, seasonal or contract work, and health insurance benefits at the same level as full-time workers while working part time.³ Educating workers about the fact that pension benefits cannot be changed retroactively may also further increase the percentage of those who stay.

Figure 3: Incentive Effectiveness Index

Source: Employee Benefit Research Institute, 2008 Recent Retirees Survey

Timing of Offer—The timing of delayed retirement incentives is important. Nearly two-thirds of retirees (63%) report that these offers would have been a lot more effective if they had known about the possibility in the two years before they communicated their intention of retiring. Another quarter (25%) indicate the offers would have been much more effective. Only 12% say it would have made no difference.
Those who worked for pay in retirement (67%, compared with 61% who did not) and those who are not satisfied with their job (65%, compared with 60% at least somewhat satisfied) are particularly likely to say the offers would have been a lot more effective if they had been aware of them in the two years before retirement.

Appendix 1: Methodology

This report presents the results of a survey conducted by Mathew Greenwald & Associates, Inc., on behalf of the Employee Benefit Research Institute (EBRI) to examine the factors that cause aerospace and defense industry workers to retire when they do and what might prompt them to delay their retirement.
The questionnaire for the study was designed by Greenwald & Associates, in cooperation with EBRI, the American Benefits Council, HR Policy Association, and the aerospace and defense industry companies participating in the project: BAE Systems Inc., Ball Corporation, The Boeing Company, General Dynamics Corporation, Harris Corporation, Honeywell International Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company, Textron Inc., and United Technologies Corporation.
Information for the study was gathered through online interviews lasting an average of 20 minutes. Invitations asking retirees to participate in the study were mailed to retiree homes by the participating companies. To qualify for the study, respondents had to have retired from a participating company in 2003 or later and currently be between the ages of 55 and 65. Where possible, engineering and technical retirees were targeted for participation in the study, but retirees were not qualified on this basis.
Online interviewing for the survey was conducted by Greenwald & Associates between March 24 and April 7, 2006. Completed responses from 5,722 retirees were received on the survey, for an overall response rate of 30%. Individual company response rates ranged between 22 and 41%. A total of 741 surveys were later discarded due to nonqualification, for a final sample size of 4,981 (3,321 engineering/ technical retirees and 1,660 retirees in other occupations).
The margin of error (at the 95% confidence level) for the total number of respondents in the survey is plus or minus 1 percentage point. There are other possible sources of error in all surveys, however, that may be more serious than theoretical calculations of sampling error. These include refusals to be interviewed and other forms of nonresponse, the effects of question wording and question order, and screening. While attempts are made to minimize these factors, it is impossible to quantify the errors that may result from them.
Percentages in the figures may not total to 100 due to rounding, multiple response, and/or missing categories.

2 The index was created using the following formula: (percentage rating incentive most effective + (percentage rating it 2nd most effective *.75) + (percent rating it 3rd most effective *.5)) *% likely to stay two years or longer. The weights are arbitrary; however, alternate schemes using different weights yielded similar results. While a perfect score on this index would be 100 (all retirees rate incentive most effective and all would stay two years or longer), it would be virtually impossible for any incentive to achieve this score. A more reasonable reference point would be a score of 33, where 50% of retirees rate the incentive among the top three most effective (25% most, 13% second most, 12% third most effective) and 80% would stay at least two years longer.
3 Payment of full or partial pension benefits to retirees working part time would be slightly more effective than the pay increase option and could be substituted if current law is changed.

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