Boom in Retirement

For decades, the baby boomer generation has been a looming economic threat. Health insurance companies braced for the onslaught of an aging population and businesses readied for mass exodus as workers crept closer to retirement age. The boomer threat is now here.

According to the Pew Research Center, 10,000 American workers hit retirement age today and about 10,000 more will cross that threshold every day for the next 14 years.

Baby boomers – the 75 million Americans born between 1946 and 1964 – account for more than a quarter of the U.S. population and a significant but declining portion of the workforce.

According to Pew, at the turn of this century, 82 percent of boomers were among the labor force, but over a decade later, that number already has declined to 66 percent. Roughly 1 in 6 baby boomers now report they are retired, up from 1 in 10 in 2010.

“This isn’t a staggered process, it’s happening now,” said John Piatchek, president and founder of financial advisory firm Piatchek & Associates Inc. “Each day, thousands of boomers are retiring. Individuals and businesses need to be prepared.”

While all businesses could suffer from the loss of an experienced employee, Piatchek said the area’s largest employers could feel it as large groups begin to retire all at once.

Despite the warnings, many businesses simply aren’t prepared to loose their most seasoned workers. In August 2014, the city of Springfield faced recruiting issues as multiple workers began retiring. Official cited specific problems among its Police force, which take longer to train.

“Baby boomers didn’t just pop up this year and stop. They are spread out over 10 years or more,” said Springfield Mayor Bob Stephens, noting the retirements are a problem the city will deal with for the foreseeable future. “When these people leave, they are taking with them 20 or 30 years of experience. That’s just not something a 25-year-old can match.”

So it begins
In fiscal 2014, 61 employees retired from the city of Springfield and 60 so far in fiscal 2015. That’s up from about 33 percent from five years ago when 45 people retired in 2010.

“Our average number of retirees over the last three years is 58 per year,” said Sheila Maerz, director of human resources for the city, via email. “Over fiscal 2012, 2013 and 2014, an average of 230 people have been eligible to retire or have been within two to three years of the normal retirement date.”

Stephens said when a longtime employee retires, not only does the city loose aknowledge base, but it potentially pays out more in retirement benefits.

“Some of these people have accumulated four, five or more weeks of vacation and sick time the city has to pay out,” he said.

“In those cases, it’s our policy not to hire someone new until that is paid out.”

Maerz said departments do not budget for retirement, but rather keep the position open until the full retirement package is paid out. Employees are eligible for sick leave payout if hired before July 1, 1998, when their separation is voluntarily and they completed at least 15 years of service. The maximum amount allowed for sick leave payout is 960 hours, paid at 75 percent of the hourly rate of pay. All employees also are eligible for payment of up to two times their annual vacation earnings, but if hired before July 10, 1995, they are allowed to receive payout for vacation up to the amount they had accrued as of Jan. 1, 2006, even if that exceeds two times their annual vacation earnings. Last year, Maerz said the average employee payout was $25,225.

“It’s a thank you to our employees for their valuable years of service, but it’s also a hit to our pocketbook,” Stephens said.

Around the Ozarks, other large employers are beginning to see an uptick in retirement numbers as well. Springfield Public Schools – the area’s third largest employer with 3,890 workers, according to Springfield Business Journal research – has seen an 18 percent retire increase over the last five years and SPS spokeswoman Teresa Beldsoe said an ageing workforce is a factor. For the 2010-11 school year, the district retired 88 employees. To date this school year, 104 left the classrooms and offices.

Down the road in Christian County, Nixa Public Schools spokesman Zac Rantz said the district’s reputation makes it an end destination school for many teachers.

With 705 total employees, Nixa retired 11 people this school year, up 57 percent from seven in 2012.

“We have remained very consistent so far,” Rantz said. “If we do see spikes in the coming years, the district is prepared. We have thousands of applications on file waiting to fill the void.”

Problem mitigation
Piatchek said all businesses should have a plan in place to replace workers.

“Secession planning is important, not just for someone like a CEO, but those key employees who run the ship,” he said. “Cross-training is going to be key. When you loose somebody, you don’t want to loose a whole way of doing something.”

Piatchek & Associates Executive Vice President Kenny Gott said a staggered retirement is key and could be achieved through a structured benefits package.

“Incentives for some employees to retire early or vice versa to retire later, could help spread out the retirements,” he said.

As older, typically higher paid, employees retire, Gott said it could actually lead to payroll savings for companies.

“Today’s workers also value different things than their parents did,” he said. “They don’t want a pension, they want intangible things like flexible work hours to raise their family and a fun work environment.

“They aren’t looking to get a good job and stay there all their lives, they want to move around, gaining experience from a variety of places.”

Mayor Stephens said to help restaff, the city hired a full-time recruiter.

“We need to be planning today for the people who are set to retire in a year,” he said. “Yes, it does cost to hire a recruiter, but it could cost the city more in the long run if we don’t be proactive now.”[[In-content Ad]]