Jim Wallace, president of GuideOne Insurance, needs a stellar talent pool to compete with much larger competitors, many of them based right near his West Des Moines, Iowa, headquarters. But in 2004, Wallace noticed a stark drop in the number of resumés GuideOne's job ads were attracting. The number of applications for professional positions, for example, had dropped by almost 40 percent since 2000. Meanwhile, 20 percent of the company's 800 employees were over the age of 55 and would soon be looking to retire. "Not enough young people are going into insurance sales," Wallace says. "We built up this great agency, but we don't see the replacements coming along."

For any company with older employees, the statistics are grim. Over the next two decades, 78 million baby boomers will turn 65, the traditional retirement age. That's going to create a talent shortage, particularly in industries such as health care, education, engineering, and financial services. In 2005, workers over 55 represented 16 percent of the work force; by 2020 that will rise to almost 25 percent. Many executives will see those statistics and breathe a sigh of relief. After all, those baby boomers have soaring health care costs. But they also possess crucial institutional knowledge, and what's more, there simply won't be enough younger workers to replace them. The unemployment rate for college graduates between 25 and 54 is only about 2 percent.

So companies need to retain their older workers as long as possible. "It's a critical issue now," says Deborah Russell, director of work force issues at AARP. "The aging of this country is going to have an impact on industries across the board." And even if your entire work force isn't in jeopardy, certain departments could still be at risk.

There's nothing a business owner can do to turn back the demographic tides. But there are a few cheap, simple ways to get older employees to stay onboard a little longer. According to research by AARP, the top two reasons boomers keep working are wages and health benefits. But other perks are attractive to older workers as well. Training, flexible work schedules, retirement planning, and eldercare assistance can be effective tools for retaining employees once they no longer need to work, says Diane Piktialis, head of mature work force research at the Conference Board, a research organization. Stanley Consultants, an engineering consulting firm based in Muscatine, Iowa, provides full health benefits to workers over 65 if they're working 20 hours per week or more. The company also offers referral services for eldercare and a health plan that covers gaps in Medicare. Partly because of its strong benefits package, Stanley's turnover rate is about 16.6 percent a year, compared with 30 percent for similar companies, according to the Bureau of Labor Statistics. That low turnover is particularly important for a company such as Stanley; more than 30 percent of its employees are 50 or older.

At GuideOne, Wallace took a grass-roots approach to upgrading benefits. In early 2004, he established an employee committee, with two-thirds of its members over age 55, to look into the company's benefits and health care offerings, and heeded many of the committee's recommendations. A five-hour retirement planning seminar geared toward older workers and their spouses was attended by half of all employees over 55. There is now an expanded fitness reimbursement, so workers who don't want to join a gym, for example, can get help buying a treadmill instead. The company offers on-site Pilates classes every week and several daily walking programs. More than three-fourths of the participants in the walking and Pilates programs are 55 or older.

Wellness programs are a relatively cheap way to improve retention and morale. GuideOne spends about $10,700 on "hard benefits" such as health care and pension for an employee making $43,000 annually, the average salary for the company's nonmanagerial employees. By contrast, the fitness reimbursement costs just $250 per person per year, and annual health screenings are provided free by GuideOne's insurance company. GuideOne's turnover has improved dramatically in the past five years, dropping from 13.2 percent in 2002 to 5.3 percent in 2006, which Wallace attributes to the company's benefits package. The new benefits have proved particularly popular among older workers. Cindy Sullivan, a 58-year-old senior training consultant for GuideOne, says people in her cohort like them because boomers take a holistic approach to health. "You're in that age range where all of a sudden there are all these tests you've never heard of," says Sullivan. "You start to understand that good health comes from many different directions."

In the long run, Congress may step in and create tax incentives to help defray the cost of retaining older workers. Senator Herb Kohl, a Wisconsin Democrat and head of the Senate Special Committee on Aging, introduced two bills earlier this year, both now in committee. One offers incentives to companies employing older workers, including tax credits for companies that offer a flexible work schedule with full retirement and health benefits. Meanwhile, companies are waiting for the Internal Revenue Service to iron out regulations regarding the Pension Protection Act of 2006, which would allow workers in defined-benefit pension plans to draw on their pensions starting at age 62 even if they work part-time.

GuideOne is keeping an eye on all this, and doing its best to keep older employees happy and healthy. "The differentiator between us and other insurance companies is our people," Wallace says. "And the more maturity they have, the better."