The U.S. workforce is experiencing a historic shift— employees who have been with companies for 10, 20, even 30+ years are reaching retirement age in record numbers. This is leading to disruption and transition patterns that many employers haven’t faced before.
For employers, this begs the question: What happens when my workforce retires?
According to the Protected Income Institute, 2025 was the single largest year in American history for people turning 65, a milestone now called Peak 65.
For organizations already running lean, retirements impact productivity, job knowledge, morale, succession planning, and hiring needs in ways that can’t be ignored. But with preparation, communication, and the right support, retirement transitions can strengthen your business rather than strain it.
This article explains the current retirement landscape, what happens when employees retire, what benefits they receive, and how employers can prepare for the largest retirement wave in history.
1. For Background: The Retirement Landscape is Changing Fast
The U.S. is entering a historic shift in workforce demographics, and employers are feeling the impact. According to the Alliance for Lifetime Income and its Protected Income Institute, 2025 represents the “peak of Peak 65®”—the single largest year in American history for people turning 65.
More than 4.1 million Americans will reach age 65 every year through 2027, which amounts to over 11,200 individuals per day. This milestone has major implications for employers who rely on long-tenured, experienced workers.
At the same time, retirement readiness varies widely across the workforce. Vanguard’s State of Retirement Readiness analysis shows that just over 40% of Americans are on track to maintain their current lifestyle in retirement.
Additionally, readiness is especially uneven across income levels: only 15% of lower-income older workers (0–29th percentile) are projected to be ready, although tapping home equity could raise that figure to 42%. In 2022, the median worker with defined-contribution (DC) plan access had $83,000 in non-housing net wealth (about 1.3× income), compared to just $13,000 (0.4× income) for those without.
So, what does this mean for employees and employers during the retirement transition?
2. Financial Concerns Are Rising for Retirees
Employers are also noticing the effect of financial strain on retirement timing. MetLife’s 2025 Enduring Retirement Model Study reports:
- 90% of plan sponsors say employees are delaying retirement because they feel financially trapped.
- 64% say employees at their company cannot afford to retire yet.
- 93% recognize that retirees need a source of guaranteed income they cannot outlive.
- 92% say the decline of pension plans has made employees increasingly dependent on defined-contribution plans (401(k) or 403 (b)) for retirement security.
- 82% cannot imagine a time when their company would no longer offer retirement benefits.
Together, these findings paint a clear picture: A record number of Americans are reaching retirement age, yet many do not feel financially ready to retire.
For employers, this means planning, supporting employees’ benefit understanding, and preparing for the staffing and knowledge-transfer challenges that accompany today’s retirement landscape.
3. What Actually Happens When an Employee Retires?
When an employee notifies you that they are ready to retire, several processes need to start:
- Notice & Documentation: Most employers ask for a 30-90 day notice (depending on role or policies). This helps HR prepare final pay, coordinate benefits, and schedule knowledge transfer.
- Final Pay Requirements: Employers are responsible for making sure final wages are issued in full compliance with applicable state and federal laws. This includes meeting state-specific timing requirements for final pay and properly calculating any owed compensation. Employers must also follow their state laws and internal policies when determining whether unused PTO must be paid out at retirement.
- Retirement Plan Options (IRS Guidance): Employers should provide retiring employees with clear information about their retirement plan options, in accordance with IRS guidance. This may include outlining whether employees can leave funds in the employer’s plan (if permitted), roll assets into an IRA, begin age-based withdrawals, or access employer-contributed funds. For employees turning 73, employers should also communicate whether Required Minimum Distributions (RMDs) apply and direct employees to appropriate plan administrators or IRS resources for next steps (per IRS.gov).
- Health Insurance Transition: Employers should communicate available post-retirement health coverage options and facilitate required transitions. This may include issuing COBRA notices within the required timeframes, providing guidance on Medicare enrollment eligibility, or explaining any employer-sponsored retiree medical benefits that are offered. Clear timelines, documentation, and points of contact help ensure a smooth transition for retiring employees.
- Knowledge Transfer: Long-term employees carry nuanced institutional knowledge that new hires (especially those who have just started their careers) simply don’t have. Employers must plan for this phase intentionally (whether through mentorship or procedure documentation).
4. How Employers Can Ensure a Smooth Retirement Transition
Retirement is a major milestone, and employers play an important role in helping employees retire smoothly and legally.
Here are some employer responsibilities during retirement transition:
Providing Benefits Education (without giving financial advice)
Naturally, employees are going to have a lot of questions. You should be helpful and prepared to educate them on their questions or concerns.
Employees may ask:
- “What happens to my 401(k) when I retire?”
- “Do I lose my health insurance?”
- “Can I work part-time after retirement?”
Employers should provide documentation and direct employees to plan administrators, IRS resources, and benefits partners.
Offering Post-Retirement Work Resources
Some retirees might not know how to navigate life without work, especially those who have been working the majority of their lives. Employers should offer post-retirement work resources like financial assistance info or retirement coaching. You can find out more about retirement benefits and other plans on the Social Security Administration website.
Additionally, with many employees delaying retirement or seeking partial retirement, employers can consider:
- Seasonal or part-time roles
- Consultant or project roles
- Training and mentorship positions
- Flexible phased retirement arrangements
This helps preserve knowledge, reduce disruptions, and may also help ease the transition to a win-win solution.
5. How to Prepare Your Workforce for the Retirement Wave
Long before retirement day arrives, employers should proactively plan for future workforce needs:
- Build a Succession Pipeline: Identify retirement-risk roles and develop internal successors early on. Understand readiness timelines for existing employees to transition into critical roles and have a career development plan in place to upskill or further develop the employee.
- Cross-Train the Team: Cross-training increases resilience and prevents knowledge gaps. This strategy also aligns with employee engagement by focusing on career development.
- Document and Capture Knowledge: Before retirees leave, make sure to document everything you can, including daily workflows, troubleshooting procedures, equipment processes, customer/vendor knowledge, best practices, or any unwritten rules.
- Update Job Descriptions: Retirements are the perfect opportunity to modernize job expectations (if you haven’t already).
- Provide Financial Wellness Support: Because many workers struggle with retirement readiness, offering education, webinars, or resources can help reduce anxiety and improve readiness.
- Understand Industry-Specific Retirement Risks: Industries like manufacturing, logistics, skilled trades, and office support face heavy retirement-driven turnover.
6. What Benefits Do Employees Receive When They Retire?
Employees typically receive:
- Access to retirement income, such as 401(k)/403(b) savings, vested employer contributions, pension (if offered), and Social Security.
- PTO payout, which varies based on state law and company policy.
- Health insurance options as many may transition to Medicare or elect COBRA coverage.
- And if eligible, unemployment benefits if the retiree’s role was eliminated (part of restructuring).
7. How Employers Hire After Retiring Employees
Replacing someone with decades of experience requires planning. You can’t expect this transition to be the same as someone quitting.
For employers:
- Begin planning and hiring 3-6 months (or as early as possible) before the retirement date.
- Have a training plan in place. One key factor to consider is the retiree’s training capabilities. In addition to being a subject matter expert, training a new employee requires skillsets such as: Adaptability, Engagement/Motivation, Active Listening, Communication, and strong Emotional Intelligence. If the retiree does not have these skills and is not able to flex them, creating a group of subject matter experts that can assist with training will help ensure the transition of skills from the retiree to the successor hire happens successfully.
- Overlap training with the retiree and successor hire (if possible) so that this accelerates knowledge transfer and builds continuity.
- Leverage Staffing Support Specialists to help reduce hiring gaps and identify qualified candidates while you handle the personal process.
8. Don’t Forget to Honor Your Retiring Employees
If a long-standing employee is retiring, give them the respect they deserve. Recognition matters. Retirements are a chance to honor and show appreciation to a hard-working team member.
Ways to honor retirees:
- Host a retirement celebration amongst the team, or ask the retiree what would make them feel appreciated (for more introverted personalities)
- Give a thoughtful (or personalized) thank-you gift
- Share public recognition (social media posts, speeches)
- Record a legacy interview for the retiree and yourselves
- Include the employee in newsletters or announcements (with their consent)
Among all the topics discussed in this article, honoring retiring employees should not be an afterthought. Spend the time, consideration, and money that a tenured (or elderly) retiree deserves as a Thank You.
How Staffing Support Specialists Help Employers Navigate Retirements
The retirement wave isn’t slowing down, and more long-tenured employees will retire in the next five years than at any point in American history. Employers who prepare now will be better positioned to maintain productivity, preserve knowledge, and support their teams.
Retirement doesn’t need to be disruptive. Whether managing one retirement or preparing for a wave, Staffing Support Specialists can help by:
- Filling skilled roles quickly
- Providing temporary and full-time candidates
- Supporting onboarding and training during transition by creating effective recruiting and onboarding strategies
- Helping reduce productivity gaps
- Providing workforce planning guidance
If you’re preparing for upcoming retirements or need support in filling key roles, view our Consulting Services or Employment Services, or contact us to get started.
