While thinking about this recent question, I was reminded of an issue at two different institutions I've taught at, as well as a third institution I am aware of via my father.
One complication I have seen at each of these universities is a number of professors who are well into their 70s (or even 80s), yet who refuse to retire. Obviously retirement is a personal decision that has no one-size-fits-all answer. However, I saw several instances of these professors causing "log-jams" in terms of resources and departmental turnover. For example, a professor who oversaw a lab next to my father's had "owned" his lab for something like 50 years. He did his research in there, brought in subsistence level funding, and "taught" a class every other semester (meaning his PhD students taught the course). He took up an entire lab and resisted anyone "encroaching" on his space. University administration placed pressure on him over some of these issues and he would usually (with much gnashing of teeth) comply in the minimally sufficient way. He never gave them enough cause to actually fire him. Because he had been with the university so long and was tenured, they could not fire him outright on account of his age alone.
In another instance, this time at one of my own universities, we had three professors who were about 85 years-old. They fulfilled their minimal teaching responsibilities (chosen in order of seniority in the department), but had each last published a paper about 5 years prior (with ~5 papers combined between them in the last decade). They sought next to no funding. They just squatted in their positions. The department could not hire any new professors until a position was vacated. By the time these professors finally retired (or died, in the case of one), there was a seven year gap between recent hires. This meant that there were exactly two professors who were not yet tenured, with one of them currently being evaluated for final tenure decisions. The department is struggling with stagnation now due to almost no turnover in their faculty. In the next five years or so, a number of professors in the department will reach age 65-70 ('retirement age'), meaning that within the next 5-7 years, the department will be comprised of ~65% untenured, assistant professors. As such, the department has been forced to attempt to recruit some established professors away from their current tenured positions at other universities (or have professors stick around well past retirement age, which caused the whole issue in the first place).
I also observed this phenomenon when I was applying to post-docs. Some universities wanted to hire tenure-track faculty, but instead had to hire post-docs in order to cover departmental teaching loads. In many instances, this leads to significant departmental instability in terms of continuity. Departments usually can't make a post-doc the graduate coordinator or even have them sit on committees (thesis/dissertation, curriculum, scheduling). This in turn places a larger burden on the existing faculty.
To be clear, these departments have policies in place that enforce certain productivity levels. These professors adhere to these policies, albeit barely. Yes, the standards could be raised, however, we also are trying to strike a balance between encouraging good research/teaching and enforcing a long list of rules and commandments.
My question is thus as follows: Should universities start including a clause in professors' contracts that mandates a certain retirement age? Or at the very least, what are some practices a department can adopt that will mitigate issues of professors who work well past standard retirement age?