The New Retirement Reality: How Changing Retirement Patterns Are Affecting Plan Sponsors 

By Chris Cristallo, CFP® | 401(k) Advisor

For decades, retirement followed a predictable pattern. 

Employees worked for 30 or 40 years, reached their mid-60s, and stepped away from the workforce. Employers built workforce planning, promotions, and succession strategies around that expectation. 

Today, that pattern is changing. 

More employees are choosing, or needing, to work longer. Instead of a clear stopping point, retirement is becoming a gradual transition. Some employees move into part-time roles. Others consult, reduce hours, or take on different responsibilities. According to Fidelity research, this shift is referred to as the “Encore Era,” a stage of life where employees continue working in flexible ways beyond traditional retirement age.  

For plan sponsors, this shift raises an important question. How should employers prepare for workforce planning when retirement is becoming less predictable? 

Retirement Is Becoming More Flexible 

Historically, retirement followed a simple path. Education came first, followed by decades of work, and then a full exit from the workforce. Today, many employees see retirement differently. 

People are living longer and staying healthier later in life. Financial concerns remain real for many households, but purpose and engagement also play a role. For some individuals, the idea of stopping work entirely does not feel appealing or realistic. 

As a result, retirement is becoming more fluid. Employees may move between work, learning, and partial retirement rather than leaving the workforce all at once.  

Employees Are Working Longer 

Recent research highlights how common this trend has become. 

According to data reference in Fidelity research, more than four in ten people who identify as retired are still working, have worked since retiring, or are actively seeking work during retirement. At the same time, roughly three quarters of current workers expect to work for pay during retirement. Financial reasons are certainly part of the story. However, they are not the only factor. 

Many employees say they continue working because they enjoy the mental stimulation, social interaction, and sense of purpose that work provides.  

For employers, this means retirement timing may become less predictable across the workforce. 

What This Means for Employers 

Delayed or flexible retirement creates both opportunities and challenges for organizations. 

Experienced employees provide institutional knowledge, leadership, and continuity. At the same time, longer careers may affect succession planning, promotion timelines, and workforce development. 

Industry research, including surveys conducted by Fidelity Investments and the Employee Benefit Research Institute, indicates that employers are already reporting concerns around talent shortages, employee engagement, turnover, and the growing number of workers approaching traditional retirement age.  

When retirement timelines shift, workforce planning may need to shift as well. 

A More Gradual Transition 

Instead of a single retirement date, many employees are looking for gradual transitions. 

Some want reduced hours as they approach retirement. Others want remote work, project-based assignments, or advisory roles that allow them to stay connected without maintaining a full-time schedule. 

Employer surveys, including Fidelity’s Participant and Plan Sponsor Survey, suggest that requests for flexible work arrangements, reduced schedules, and post-retirement consulting roles have increased compared with just five years ago.  

Handled thoughtfully, these transitions can benefit both sides. Employees may maintain purpose and flexibility, while organizations may retain valuable experience during critical transitions. 

The Role of Retirement Plans 

Retirement plans remain one of the most important tools employers have to support long term readiness. 

When employees are financially prepared, retirement may become more of a choice than a necessity. That clarity can help organizations better anticipate workforce transitions, although outcomes will vary based on individual and organizational circumstances.

Plan design features such as automatic enrollment, automatic escalation, strong default investments, and consistent participant education are commonly used strategies that can play an important role in improving retirement readiness over time. Plan sponsors should evaluate these features based on their specific workforce, objectives, and fiduciary considerations. 

For plan sponsors, retirement readiness is not only a participant outcome. It may also influence workforce stability, budgeting, and long-term planning. 

Final Thoughts 

Retirement is evolving. 

For many employees, it is no longer a single event but a transition that unfolds over time. The Encore Era reflects a workforce that is living longer, thinking differently about work, and redefining what retirement looks like. 

For plan sponsors, the key takeaway is preparation. 

When retirement programs support long term financial readiness, employees may gain flexibility in their career decisions and organizations may gain better visibility into future workforce transitions. 

Together, let’s evaluate the way we approach retirement programs. 

Sources:

• Fidelity Investments, Is Retirement Retiring? How the Encore Era may impact employer strategies for retaining and engaging mature talent, October 2024.
• Employee Benefit Research Institute, 2024 Retirement Confidence Survey. Referenced in Fidelity research.
• Society of Actuaries Research Institute, Megatrends Impacting the Future of Retirement Plans, April 2023. Referenced in Fidelity research.
• Fidelity Participant and Plan Sponsor Survey, The Evolving Landscape of Retirement, July 2024. Referenced in Fidelity research.