The Working Dead: Preventing Retirement in Place (R.I.P)

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R.I.P; is a commonly used and well-known acronym, but not normally in the field of business. In terms of business, R.I.P stand for “Retired in Place”. It’s not a new term, but a fairly unheard of one until recently. Retired in place is a slang term used to describe an employee who works just hard enough to not be fired and waits until he or she is eligible to take retirement benefits. Needless to say, this can be detrimental to everyday business practice. It can apply to any position, in any industry, from owners right down to the employees. How can we motivate these employees to take the final step towards retirement without becoming discriminatory?

The term “Retired in Place” was first coined in a 1990 article by Agency Consulting Group to describe some agency owners and staff during consultations ten years prior, hinting that the term has been around for at least 40 years. This was their most popular publication, and they re-run it every few years, which is an indication that the problem of retiring in place is not going to end any time soon. But how does this affect day-to-day business and the industry overall?

Arthur L Noonan, a senior partner and actuary at Mercer, made this important point:

“If 4 percent of your population is retirement eligible and half of those people choose to delay retirement, the effect could be that 10 percent of your employees experience promotion blockage. This means 1,000 employees would experience promotion delays in a 10,000 employee firm.”

To solve this tricky business roadblock, we first need to understand why these retirees choose to stay.

Between February 21st and March 17th of 2014, a twenty-two minute, online survey was conducted among a nationally representative sample of 4,143 workers by the Harris Poll Transamerica Center for retirement studies. The respondents consisted of U.S. residents, age 18 or older, and full time or part time workers in a for profit company employing ten people or more. The base of this study included 1,021 Millennials, 1,120 Gen X, 1,805 Baby Boomers, and 197 who were born prior to 1946.

The survey revealed that:

  • 65% of workers planned to work past age 65 or did not plan to retire. Slightly more than half (52%) planned to continue working after they retire.
  • 62% of the employees who planned to work in retirement and/or past age 65 indicated that their main reason was income or health benefits.
  • 34% planned to work for enjoyment, including 18 percent who wanted to stay involved and 16 percent who enjoyed what they did.

While this survey was conducted in 2014, the results are still relevant in the state of today’s current economic situation. Considering the soaring prices of health care and inflation, coupled with the pandemic, this is now more relevant than ever. The survey also uncovered a surprising disconnect between employee expectations and employers’ retirement realities:

  • Only 48% of employers had practices in place to enable shifting from full-time to part-time and even fewer (37%) allowed taking on new positions that are less stressful or demanding.
  • This disconnect is amplified by even fewer employees believing that their employers have such practices in place: Only 21% believed their employer would enable them to shift from full-time to part-time and only 12% said their employer would enable them to take positions which are less stressful or demanding.

In addition, one-third felt very or extremely confident about their retirement savings while the remaining two-thirds expressed some doubts, with a quarter of those being not too confident, or not confident at all. This data points to a larger issue of employers not taking the adequate steps and time needed to transition their employees properly into retirement. This could be for reasons as simple as cost and time, but the overall expense that retired in place employees present outweighs those other factors in a long-term, successful business plan.

There are solutions for transitioning your employees comfortably into retirement and preventing retirement in place. The easiest place to start is building a well-structured plan for transitioning retiring employees from full-time to part-time positions. This transition typically includes changing to positions that are less stressful or demanding. For instance, if a producer in your company is R.I.P., he or she may transition nicely into the role of an Account Executive. The employee is now responsible for maintaining the book of a business, but is no longer expected to contribute to new and upcoming business goals. The compensation level is usually adjusted accordingly.

During this transition, offering retirement and transition planning resources is crucial for success. There are a variety of options, ranging from online tools and retirement calculators, professional investment advice, seminars, webinars, and workshops. Adding financial counseling, or even an annuity payout option as a part of their retirement plan can also be an appealing incentive and help your retirees feel more at ease about the transition.

In addition to retirement and transition planning, further education about Social Security and Medicare benefits can add an extra sense of security for hesitant retirees. These programs can be very difficult to navigate, so offering additional support during this time is important. Among employers who do not have any set retirement plan in place, 84% do nothing to help their employees transition into retirement. Arthur Noonan also stated: “A business that provides incentives for retirement-eligible employees to leave would outperform one whose incentives are disconnected from tenure.”.

Another reason it’s important to prevent retirement in place is company morale. The hard-working employees in your company will become frustrated at having to pick up extra responsibilities, which in turn causes hard feelings among colleagues and lowers morale. Low morale leads to low productivity, and even the loss of valued employees.

With all of the endless resources available to aid retirement, retirement in place is preventable. Keeping these points in mind, you can build a successful, long-term business plan to guarantee your employees are incentivized to retire in a smooth, and appropriate timeline.


Do you need help with R.I.P?

Contact STM to discuss ways we can help you create a plan for transitioning retired in place employees.

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