Why the Retirement Crisis is an HR Crisis

The impact of the US retirement crisis on workforce mobility and corporate costs.

For HR Benefits managers, the "retirement crisis" is often discussed as a personal financial problem for employees. However, the reality is that the massive savings gap is rapidly becoming a significant operational and financial risk for your organization.

Approximately 10,000 Americans turn 65 every day, creating a wave of potential exits that can either lead to healthy succession or, if financial barriers prevent those exits, a complete stagnation of your talent pipeline.

When your senior talent cannot afford to retire,it creates a bottleneck that impacts everything from healthcare costs to your internal talent pipeline.

The Reality Check: A $1.3 Million Gap

The math for the average American worker is no longer adding up. The gap between what people believe they need and what they actually have has reached an all-time high:

• The "Magic Number": Americans now believe they need $1.46 million to retire comfortably, a figure that has jumped 15% in just one year and a staggering 53% since 2020.
• The Reality: The average retirement savings for U.S. adults has stalled at just $88,400.

This $1.37 million shortfall is driven by a lack of rigorous planning; only 52% of workers have ever actually calculated their financial needs. The rest rely on "gut feeling" targets that are frequently outpaced by inflation.

This isn't just a numbers problem, it’s a psychological one. Today:

• 63% of Americans believe retiring on time is "unattainable."
• 35% are already actively delaying their retirement because of these shortfalls.
• 2 out of 3 employees fear outliving their savings entirely.

The Hidden Cost of Delayed Retirement for Employers

For a business, an aging workforce that wants to retire but can't is expensive. According to Savvly’s employer insights, delayed retirement creates several "hidden" costs for the company:

1. Blocked Career Paths: When senior roles remain filled indefinitely, your high-potential junior and mid-level talent see no room for advancement. This leads to "brain drain," where your best younger talent leaves for competitors who offer clearer paths to promotion.
2. Higher Operating Costs: An older workforce typically correlates with higher salary expenses (salary creep) and significantly increased premiums for healthcare and insurance.
3. The "Sandwich Generation" Productivity Drain: 54% of Americans in their 40s are now "sandwiched", raising children while simultaneously caring for aging parents. This group is under immense financial stress and is highly motivated to ensure they do not become a similar burden on their own children.
4. Social Security Anxiety: With 80% of retirees fearing Social Security insolvency by 2033, many feel they must "work forever" just to cover basic expenses.

Why Traditional 401(k)s Are Failing

The tools we’ve relied on for decades are not solving the longevity problem. Most current retirement tools track net worth (assets) but fail to solve for income sufficiency; ensuring money lasts as long as the employee does.

Retirees often plan for a 20-year retirement, yet a healthy couple has a 50% chance of at least one spouse living 27 years or more. Without a solution for those "late-life" years, employees remain frozen in their roles out of fear.

A New Approach: Restoring Workforce Mobility

To unlock workplace mobility, employers need to look beyond the standard 401(k) match. Savvly can offer a low-cost benefit that complements, but doesn’t replace,  existing retirement benefits by focusing specifically on the longevity gap.

By helping employees secure their income for age 80 and beyond, Savvly can give them the confidence to spend their 401(k) assets earlier and retire on time.

The result for HR?

• Predictable Succession: Healthy retirement rates allow for structured talent development.
• Cost Control: Reduced salary and healthcare "creep" by allowing senior staff to transition gracefully.
• Competitive Advantage: Offering a solution for the #1 fear of employees (outliving their money) makes your benefits package stand out in a crowded market.

The Bottom Line

The retirement crisis is no longer a distant social issue—it is a present-day HR challenge. By implementing longevity benefits, you can provide your employees with financial security while simultaneously protecting your company’s bottom line and talent pipeline.

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