Employee turnover is a very expensive process. Succession planning for employees due to retirement is critical, and also something that you can prioritize and plan for to ensure your business will continue to run smoothly upon departure. While facilitating a CFO Alliance webinar on The CFO’s Responsibility in Retirement Planning, I asked the audience the question below:
It is great to see 40+% planning proactively for succession of key talent. We hope that the data from our retirement analysis could improve upon current practices and fine tune succession planning. We view the retirement plan as a strategic asset for those companies willing to track and review this data. Having a sightline to the number of employees nearing an early, ‘on-time’, or delayed retirement can be very impactful.
For those that are more reactive or struggling with this issue, we’d argue that the retirement readiness data would be a great place to start for more efficient planning. It is rare that we speak with a c-suite that has an accurate awareness of age bands within their organizations, its just not a data point that comes front and center very often.
I also asked what percentage of the participants’ workforce is in the ‘retirement red zone’ and I received the response below:
As plan sponsors and advisors, we can only do so much for an employee that is at or near 65 and unprepared to retire. We are going to see delayed retirements in this cohort thus seeing additional wage and health care drag on company performance. However, education and counsel for these employees can move the needle so we encourage consistent meetings with the plan’s advisor.
The big impact can be made with plan design and better long term behavior for those 10+ years away from retirement. A 55 year old re-enrolled into the plan and into a prudent target date fund for example can completely alter their path to retirement at what is typically their peak earnings and savings time period.
For those companies represented above that have a large contingent of retirement red zone employees, its time to triage the situation. For those that have a younger population, there is a great opportunity to set a plan and culture in place so that delayed retirements never become a significant issue within your organization.
If you missed our webinar, click here to view the recording. If you have any questions about the CFO's responsibility in retirement planning, I can be reached at firstname.lastname@example.org.