Human resource professionals concerned about a possible brain drain when Baby Boomers retire may be encouraged by a Lehigh University study showing that late-career workers expect to retire later. However, companies should be concerned about the expectations of mid career professionals, who say they want to retire earlier, signaling a potential talent crisis down the road.
Possibly the most surprising of the study’s results: Job satisfaction does not have much to do with retirement expectations when factors such as income, work centrality and attitudes toward retirement are taken into account.
The Lehigh University study is one of the first studies to include mid career employees in a survey on retirement expectations, compared to older workers—and weigh the factors that may predict retirement expectations. Altogether, the study shows that the interplay between career stage and retirement expectations is more nuanced than found in previous research.
“The increasing variability in retirement patterns suggests that retirement expectations are shaped throughout the life course, not just late in life,” said Corinne Post, an author of the study and an assistant professor of management in Lehigh's College of Business and Economics. “Demographic changes in many developed economies mean not only that the number of older, late career workers is increasing, but that the median age of the labor force is climbing. If organizations want to capitalize on their workforce investments and prevent skill shortages, they must adequately respond to this demographic change.”
Using a sample of 441 professional workers, Post determined that those later in their careers expect to retire three years later than those at mid-career (65 versus 62). The Lehigh findings suggest that enhancing the “centrality of work” for the employee would better delay retirement, especially for those in late career. Work centrality includes job autonomy, variety and responsibility—all of which play larger roles in retirement expectations than salary or job satisfaction.
Researchers found that expected retirement age is much more sensitive to income at mid career compared to late career. Conversely, the expected retirement age may be more sensitive to work centrality at late career compared to mid career.
Conventional wisdom among HR professionals has always been that job satisfaction is the best way to delay retirement among employees. The study, Pathways to Retirement: A Career Stage Analysis of Retirement Age Expectations published in the current edition of the journal Human Relations, suggests that job satisfaction does not influence retirement timing and won’t help retain either mid- or late career employees.
Why is this important?
An aging labor force and the expected retirement of the Baby Boomer generation are at the forefront of long term human resources planning. Add in improving health among older workers and the chaos of the Great Recession, and human resource experts are scrambling to improve their approach to retirement planning.
If organizations want to capitalize on their workforce investments and prevent skill shortages in the long run, they must adequately manage the retirement process. This process has grown more complex in recent years, with retirement experts no longer convinced they can accurately predict when older workers will exit the workforce. Changing perceptions of retirement are also mudding the waters. Retirement, particularly early retirement, used to mean complete disengagement from the workforce. More often, retirement is now partial or even deferred.
Given these circumstances, it has become urgent not only to re-examine the factors affecting retirement age expectations, but also to identify the respective strengths of traditional predictors of retirement among late career employees as well as among those at mid career.