The decision to retire is an intensely personal one that involves carefully weighing several factors. Overall, more workers retire by choice than for any other reason (Hayward, Friedman, & Chen, 1998; Henretta, Chan, & O’Rand, 1992). People usually retire when they feel financially secure, considering projected income from Social Security, pension plans, and personal savings. Of course, some people are forced to retire because they lose their jobs (Henretta et al., 1992; Stetz & Beehr, 2000). As corporations have downsized in the early and mid — 1990s as well as in the more recent economic recession, some older workers have been offered buyout packages involving supplemental payments if they retire. Others have been permanently furloughed, laid off, or dismissed.
The complexity of the retirement decision is also influenced by one’s occupational history (Hayward et al., 1998). The longest occupation held in the middle of one’s career combines with occupational roles held in the last stages of the career to influence the decision to retire and the connection with health and disability (discussed later). Feeling that retirement is a choice rather than a requirement is associated with an earlier planned retirement age, as well as adjustment to retirement (Quine, Wells, De Vaus, & Kendig, 2007; Sterns & Gray, 1999). Let’s examine these factors more closely.
Health. One of the most important influences on retirement decisions is health, regardless of whether someone is approaching mandatory retirement. Poor health is one of the predominant reasons that people retire early (Hansson, DeKoekkoek, Neece, &
Patterson, 1997; Mutchler, Burr, Massagli, & Pienta, 1999; Schults & Wang, 2007). The importance of health cuts across ethnic group lines, especially in terms of early retirement. For example, health problems causing functional impairment are the main reason European Americans, African Americans, and Mexican Americans retire early (Burr et al., 1996; Stanford, Happersett, Morton, Molgaard, & Peddecord, 1991). However, it is not a simple relationship. For example, health has its greatest influence on the decision to retire early for individuals who find the idea of work unattractive because of family or economic factors (Mutchler et al., 1999). In other words, it appears that the impact of health on retirement is apparently determined by trends in other work-related characteristics such as marital status. In addition, the specific health problem matters. Persons are most likely to retire when they contract major health conditions such as lung disease and cancer, whereas if they contract minor health conditions such as diabetes and arthritis, they are likely to do either: retire or change jobs (Schultz & Wang, 2007).
Gender Differences. Most of what we know about retirement decisions is based on research on men (Sterns & Gray, 1999). However, women may enter the workforce later, have more discontinuous work histories, spend less time in the workforce, and their financial resources may differ from men’s, which may affect women’s decisions to retire (Calasanti, 1996; Sterns & Gray, 1999; Stetz & Beehr, 2000). In fact, research indicates that men’s and women’s decisions to retire may be based on different factors. Talaga and Beehr (1995) found that women whose husbands were in poor health or who had more dependents were more likely to retire; the opposite was true for men. However, there were some similarities; having a retired spouse increased the likelihood that spouses would also retire.
As more women remain in the workforce for much of their adult lives, more research will be necessary to understand the extent to which gender differences matter in the decision to retire. At this point, though, it appears that the male model of retirement is insufficient to account for women’s
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Few studies have investigated the characteristics of retired African Americans.
experiences (Sterns & Gray, 1999; Szinovacz & DeViney, 1999).
Ethnic Differences. Very little research has been conducted on retirement decisions as a function of ethnicity. A few investigators have examined the characteristics of retired African Americans like the couple in the photograph (e. g., Flippen & Tienda, 2000; Gibson, 1986, 1987; Jackson & Gibson, 1985). These studies show that African Americans tend to label themselves as retired or not based on subjective disability, work history, and source of income, rather than simply on whether or not they are currently employed. An important finding is that gender differences appear to be absent among African Americans; men and women base their self-labels on the same variables. Thus, findings based on European American samples must not be generalized to African Americans, and separate theoretical models for African Americans may be needed (Gibson, 1987). The same may be true for other ethnic groups as well.
Planning for Retirement
What do people need to do to plan for retirement? Is it just a matter of saving money? Or do people need to take psychological factors into account as well? Can prospective retirees anticipate and avoid
some of the difficulties? For example, one common problem in adjusting to the retirement role is the abruptness of the transition from employment to unemployment. What processes may minimize the difficulties of this change?
One key element to successful retirement is preparation. People who plan for retirement tend to be more successful in adapting to this major life change (Lo & Brown, 1999; Sterns & Gray, 1999). Getting ready can take several forms: conscious or unconscious planning, informal or formal steps, and so on. One formal way to prepare for retirement is to participate in a preretirement education program. Such programs cover a wide variety of topics, from financial planning to adjustment. A typical content list is contained in Table 12.3. Potential
Table 12.3
Topics in a Typical Preretirement
Education Program
I. Deciding to retire: when is the right time?
II. Psychological aspects of aging
A. Work roles and retirement
B. Personal identity issues
C. Retirement as a process, paradox, and change
D. Effects on relationships with family and friends
III. Finances
A. Social Security
B. Pension
C. Insurance
D. Employment
IV. Legal aspects
A. Wills
B. Personal rights as senior citizens
V. Health
A. Normal aging
B. Medicare and Medicaid
C. Health insurance issues
VI. Where to live: the pros and cons of moving
VII. Leisure activities
A. Travel
B. Hobbies
C. Clubs and organizations
D. Educational opportunities
E. Volunteering
benefits of such planning are more financial equity, the increased possibility of a healthier lifestyle, more positive attitudes toward retirement, exposure to new leisure activities, and ways to explore alternative housing (Atchley, 1996; Hershey, Mowen, & Jacobs-Lawson, 2003; Richardson, 1993; Sterns, Laier, & Dorsett, 1994).
Every comprehensive planning program for retirement focuses on a major obstacle to retirement: finances. Retirement, on average, involves a reduction in income. Obviously, if one is not prepared for this degree of income loss, financial pressures will be severe. Research shows that financial issues are strongly related to the decision to retire and adjustment to retirement (Davies et al., 1991; Feldman, 1994; Hansson et al., 1997). Surprisingly, a large number of people do not adequately plan for the financial changes that accompany retirement (Ferraro & Su, 1999). Overall, older adults who are satisfied with their financial resources tend to make the decision to retire and adjust well to that decision. However, findings also indicate that financial issues influence retirement decisions and adjustment differently depending on the major reason for retirement (Henretta, Chan, & O’Rand, 1996). When retirement is compulsory or forced, financial security tends to increase the rate of retirement. However, when retirement is mainly due to health limitations, financial security tends to decrease the rate of retirement. Finally, when job loss is the main reason for retirement, financial security does not influence retirement rate. However, despite any reason to retire, higher salaries, overall, tend to reduce the decision to retire.