Why does Retirement Age Matter?
In retirement planning, we often focus on the “end goal” — making plans related to the age we want to be when we retire, and what our spending level needs are after we don’t have a steady income coming in from our jobs.
But do you know the effect of what happens when we aren’t ready to retire on time? And do you know what that means for your company if an employee can’t retire on schedule?
At a recent session of “Plan Sponsor University,” Tom Foster of MassMutual, outlined some key risks to a company (and its employees) when someone can’t retire on schedule and has to work well beyond the standard retirement age. They include:
Lower productivity: Workers who have to stay on longer than the typical retirement age may become less and less productive the older they get. This affects the bottom line of your company in significant ways.
Higher healthcare and workers compensation costs: On average, older workers have higher healthcare costs and premiums as well as higher worker’s compensation rates that must be paid by employers. These costs can also be passed on to other employees.
Higher salary costs: Seasoned employees are typically compensated at a higher rate than entry-level employees.
Unexpected turnover: Older employees often hold up the advancement of younger, entry-level employees, who cannot be promoted because their more experienced colleagues occupy senior-level positions. Without growth opportunities, younger employees will seek out new positions where they have more chance to advance their own careers.
Financial wellness: Studies show that employees who are financially stressed — and we can assume that someone working well beyond retirement age will be financially stressed —are prone to working more slowly and may take more sick days.
What’s the solution?
A company-sponsored defined contribution plan, such as a 401(k), is a key way to ensure the viability of your company. Not only can it help your employees reach their retirement goals, it will also set your company up to succeed, by ensuring that your employees are retiring on time and not holding up the growth of your company.
Want to evaluate your retirement plan or need assistance setting up a company sponsored retirement plan? Contact the Robin S. Weingast & Associates team today to help!