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