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The Cost of Delayed Retirements

Jul 02, 2019

Key Takeaways

  • Working longer can benefit both the employer and employee – if done for the right reasons.
  • 57% of finance execs believe retirements are delayed due to inadequate retirement savings.
  • A one-year increase in average retirement age can increase workforce costs about 1-1.5% annually.


Having employees able to retire “on time” is a win/win scenario for both employees and employers. But these days many employees are expected to delay their retirements beyond their desired retirement ages because they don’t have adequate savings to sustain them throughout their retirement. To quantify the impact of delayed retirements on employers’ costs, Prudential conducted research1 using workforce composition and cost assumptions based on national averages for private sector workers.

According to research, a one-year increase in average retirement age results in:

  • Incremental annual workforce costs of about 1.0%–1.5% for an entire workforce2. For an employer with 3,000 employees and workforce costs of $200 million, a one-year delay in retirement age may cost $2-3 million.
  • An incremental cost of over $50,000 for an individual whose retirement is delayed3. This represents the cost differential between the retiring employee and a newly hired employee.

How much can delayed retirement cost employers?

Compared to other types of workforce costs, on an aggregate national basis, a delay in retirement may cost employers about as much as:*

A Delay in Retirement of… May Cost Employers About as Much as….
1 Year
  • Paid sick and personal leave combined, or
  • Two times life and disability insurance combined
2 Years
  • DC retirement plans, or
  • DB retirement plans, or
  • Paid holiday leave
3 Years
  • Paid vacation leave, or
  • More than one-third of health insurance
Here are some best practices for employers to help their employees be financially secure so they may retire on time:
  1. Consider adopting retirement programs with features that help employees retire on time.
  2. Provide education to help employees proactively make informed financial decisions.
  3. Adopt a holistic approach to improving employees’ financial wellness.
  4. Consider using data analytics to customize the cost of delayed retirement analysis for your organization.


Read More

To learn more about the actions that can help employees retire when they wish, read Why Employers Should Care About the Cost of Delayed Retirements  

 You may also be interested in other Financial Wellness topics.

1With supporting research and analysis from the University of Connecticut’s Goldenson Center for Actuarial Research.

2Represents the incremental annual cost of a one-year delay in retirement averaged over a five-year period.

3Represents the difference between the workforce costs of a retiree vs. an entry-level employee. It is assumed that when an employee retires, an advancement opportunity is created such that all employees progress through the workforce (i.e., “move up a notch”), and an entry-level employee is hired.

*Based on national aggregate workforce costs, which are spread out over all private sector employees, even though not all employees have access to every benefit.



The Prudential Insurance Company of America, Newark, NJ


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