Vituko Mitaani

More boomers want—or need—to stay in the workplace longer. But staying on the job as you approach retirement age tends to makes you more expensive to an employer, because of your health-care costs. And that’s why workers now face a growing wave of initiatives from companies designed to keep those costs down.
The number of older Americans in the workforce has risen sharply over the past seven years, thanks in part to the battering that retirement accounts and home values took in the Great Recession. In 2013, 32.4 % of Americans ages 65 to 69 were either working or actively looking for work, versus 27.9 % in 2006, according to the Bureau of Labor Statistics. In a March survey from the Employee Benefit Research Institute (EBRI), 26% of respondents said they expected to work to age 70-plus, versus 17% in 2003. And while some of those folks simply love to work, others are doing so because they feel they must. “Their preference would be to be on a beach in Florida,” said Edmund F. Murphy III, head of defined contributions at Putnam Investments, which provides record-keeping services for company 401(k) plans.
Unsurprisingly, older workers cost more to insure than their younger counterparts. Total health-care spending on workers ages 65 to 74 is 54% higher than that spent on workers ages 45 to 54, according to EBRI. While workers at smaller companies generally go on Medicare when they turn 65, in most instances, employees at companies with 20 or more workers stay on their workplace health plans (in part because the government requires that those larger companies be the primary health-insurance payer for over-65 types who stay on the job).
To cope with costs for this group, employers have adopted strategies that range from designing wellness initiatives for chronic conditions, to education on saving for retirement. One of the more interesting tools in the latter category is Putnam’s new online “health cost estimator.” The tool, available to the 75,000 or so workers whose companies use Putnam as their 401(k) record-keeper, is designed to help workers 35 and over get a clearer sense of their future health-care expenses so they can save accordingly while there’s still time. Putnam says its tool is the first of its kind.
Medicare, while much more affordable than individual insurance for people in their early 60s, still requires premiums, coinsurance and copayments that often come as a surprise to recipients. And of course, Medicare doesn’t cover everything. The Putnam tool’s estimates rely on actuarial data supplied by a third party, and factor in probable deficit-trimming reductions in Medicare coverage in the coming decades; it’s also customized with workers’ salary and account balances and their self-reported health condition.
Using the tool, a hypothetical 44-year-old worker in excellent health, with $50,000 in her retirement account, could see that she can expect to pay an estimated, inflation-adjusted $580 monthly on health-care costs at age 65, or 18% of her projected monthly income. That employee would see a graphic representation of those figures, and her current income gap, as well as a visualization of the impact raising her 401(k) contribution rate or tweaking her mix of investments would have in helping to close that gap.
Many want, or need, to work past 70
People who aren’t prepared for their future health-care costs, of course, can ill afford to retire. In talking to companies, Putnam executives share the EBRI survey results that one in four workers plans to work until 70 or beyond. This “gets a rise out of clients” who grow alarmed about the high cost of providing health insurance to this demographic, Murphy said. Putnam is using the health-care estimator as a way to differentiate its services in the retirement planning marketplace. The hope is that better health-care cost planning will lead to a win-win scenario, with employees retiring when they want to.
To be sure, plenty of older people continue working beyond retirement age because they enjoy the stimulation and the camaraderie. What’s more, some industries particularly value the experience that comes with age. Companies in defense- and science-centered industries, for example, have given older workers retention bonuses to encourage them to stay on, said Steven Wojcik, vice president of public policy at the National Business Group on Health, a membership group that helps large employers with their workers’ health benefits. “Our education system is not producing enough people to meet the requirements of these highly skilled jobs,” Wojcik said.
Federal laws prohibit employers from basing personnel actions of any sort on age (protection begins at the relatively tender age of 40). Employers must keep older workers’ benefits the same as those of similarly positioned workers of any age. One way companies are saving on older workers’ health-care costs while still benefiting from their expertise is by offering them consulting jobs if they retire and leave the employer’s health plan, said Matthew Stevenson, principal in the analytics and planning group of Mercer, a human resources consulting firm. This happens most often with Medicare-eligible workers 65 and over in knowledge-based industries such as some types of engineering, information technology, and human resource consulting. Workers are often offered a higher salary than they formerly earned to help fund what Medicare doesn’t cover (although some workers game the system by accepting the offer, then going onto a spouse’s health plan, Stevenson said).
Saving money with ‘wellness’
Some boomers are finding that their employers are intervening to manage their health-care costs well before they reach retirement age. Many companies mine their medical plan data to help design wellness programs that can reduce older workers’ ailments and save on health-care spending, experts say. Chronic conditions tend to emerge around age 45 or 50, experts say, so these programs benefit more than just the oldest employees. Employers might look at their workers’ average body-mass index, cholesterol levels or prevalence of diabetes.
Putnam’s calculator allows workers to factor in their own present-day health conditions to see how they will affect their own health-care costs down the line. If that hypothetical 44-year-old worker has high blood pressure today she can expect to spend an inflation-adjusted $754 per month on health-care expenses at age 65, or 21% of income, versus 18% if she were excellent health. (At age 80, she would spend 27% of income on health care if she were in excellent health, versus 35% with high blood pressure.)
All the alarming-sounding numbers, employers say, are designed to make it possible for workers to be ready to retire when they’re young enough to enjoy it. Other experts stress the same point. Rocco Carriero, a financial adviser in Southampton, N.Y., says he sees how quickly and unexpectedly health concerns escalate in his clients. People get to the point where doctors’ appointments become so consuming that they can hardly get away for a vacation, if they even feel up to one. Carriero tries to prepare his clients to retire on their own terms. For the healthy who can afford it, that includes taking those big trips on the bucket list: “If you can walk, do it now, because you might not be able to do it in five to seven years.”