Why Employers Should Care That Their Employees Are Not Retiring On Time

Employers may sometimes view retirement timing as a personal choice that doesn’t affect the business. In reality, when employees delay retirement because they are not financially ready, it creates very real costs for the organization. These costs show up in lower productivity due to financial stress, higher health care expenses, and reduced opportunities for younger employees to advance, which can lead to turnover. Taking a closer look at these impacts can help employers see why helping employees prepare for retirement is good for both the workforce and the bottom line.

Financial Stress and Lost Productivity

Financial stress is one of the leading causes of distraction at work. The 2023 PwC Employee Financial Wellness Survey found that one in three employees say financial stress affects their productivity, and among financially stressed employees who are distracted at work, more than half spend at least three hours each week dealing with personal financial issues on the job. That is a direct loss of productive hours for the employer and an indicator of ongoing financial instability for the employee.

Bank of America’s 2025 Workplace Benefits Report echoed this trend, finding that only 47% of employees feel financially well. The survey also found that financially stressed employees are far less likely to report being focused and engaged at work. When employees are financially distracted, they are also less likely to save adequately for retirement, which increases the likelihood that they will need to work longer than they would prefer.

The Cost of Delayed Retirement

When employees continue working past the point when they would otherwise retire because they do not feel financially ready, costs for the employer increase in several ways:

Higher Health Care Costs. Older employees generally have higher health care utilization, which can drive up group health plan costs—particularly for employers with self-funded plans. The 2024 KFF Employer Health Benefits Survey reported that average family premiums rose 7% in the most recent year to $25,572, and an aging employee population is one factor that can add upward pressure to costs.

Slower Career Progression for Younger Employees. With more employees working past 65, there are fewer promotion opportunities for younger workers. Pew Research reports that 19% of Americans over age 65 were still working in 2023, nearly double the rate 30 years ago, and the share of older workers is projected to keep growing through 2032.

This can create frustration among mid-career employees who are ready for advancement but do not see opportunities opening up. High-performing employees may leave the organization, and replacing them can be costly when factoring in recruiting, onboarding, and lost productivity during the transition.

Direct Cost Estimates. Research by Prudential, as shared through USI Consulting and other retirement industry sources, finds that each year an employee delays retirement can cost an employer more than $50,000 per person—reflecting higher salary and benefit expenses compared to a new hire. In a hypothetical company with 250 employees, if just three employees delay retirement for three years, it could potentially cost the company approximately 1450,000 in higher overall workforce costs.

Helping Employees Retire on Time

Employers can take steps to make sure their retirement plan is designed to help employees prepare adequately for retirement and reduce the need to delay:

• Use automatic enrollment and automatic escalation. Data from Vanguard’s How America Saves 2025 report shows that participation and savings rates rise significantly when these features are in place.
• Add an emergency savings option. SECURE 2.0 allows employers to add a payroll-deduction emergency savings account that can reduce short-term financial stress and cut down on retirement plan withdrawals.
• Offer a student loan repayment match. Employers can now match student loan payments as if they were retirement contributions, which helps employees who might otherwise miss out on valuable matching dollars.
• Provide clear education and tools. Offering retirement readiness education, online calculators, and one-on-one financial counseling can help employees understand if they are on track and what steps they can take to improve their savings rate.

How a Plan Advisor Can Help

A knowledgeable retirement plan advisor can support employers in several important ways:

• Analyze workforce retirement readiness. Advisors can review plan data to identify whether employees are on track to retire at typical ages and highlight where gaps exist.
• Evaluate plan design. They can recommend plan features—such as auto-enrollment, auto-escalation, Roth options, and updated matching formulas—that make it easier for employees to save enough for retirement.
• Support SECURE 2.0 implementation. Advisors can help employers understand new plan design opportunities, such as emergency savings accounts and student loan matching, and coordinate with recordkeepers to put them in place.
• Deliver employee education. Advisors can provide group sessions and individual consultations that give employees the information they need to make better decisions about saving, investing, and timing their retirement.
• Measure progress. Regular reporting on participation rates, average deferrals, and projected retirement readiness helps employers see whether the plan is moving employees toward better outcomes.

Final Thoughts

Employees who cannot afford to retire on time create real challenges for employers—higher benefit costs, blocked advancement opportunities, and the ongoing productivity loss associated with financial stress. Employers who take a proactive approach to retirement readiness benefit from a more engaged and productive workforce, more predictable workforce planning, and lower long-term costs.

A well-designed retirement plan, combined with effective education and guidance, can help employees reach the point where they are financially prepared to retire on time. Plan advisors can be a valuable partner in assessing the current situation, making plan improvements, and helping employees take the steps necessary to reach a secure retirement.

Informational Resources: Vanguard: “How America Saves 2025;” PwC: “2023 Employee Financial Wellness Survey;” KFF: “2024 Employer Health Benefits Survey;” Bank of America: “2025 Workplace Benefits Report;” Clark Schaefer Hackett: “Eight SECURE 2.0 Provisions You Need to Know About in 2024” (August 5, 2024); USI Consulting Group: “Is It Time to Benchmark Your Plan?” (August 13, 2024); Pew Research Center: “The Growth of the Older Workforce” (December 14, 2023).