Evaluating the Decision to Retire

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Evaluating the Decision to Retire

The Eagle-Tribune
Copyright 2019 The Eagle-Tribune / Community Newspaper Holdings, Inc. (CNHI). All Rights Reserved. Distributed by NewsBank, Inc.


Propelled by sweeping demographic, economic, and lifestyle changes, retirement in America is experiencing a transformational shift. Starting with the "baby boomer" cohort (those born between 1946 and 1964), more workers plan to delay retirement past the traditional age of 65. Financial factors, including the disappearance of old fashion pensions that pay retirees an income for life and those expanding lifespans that can mean funding a retirement lasting three-decades or longer, have been the two main drivers of this trend. Increasingly however, social and psychological factors are also playing a role in the decision of when to retire, or even whether to retire at all.

From a life stage perspective, the decision to exit the workforce and retire is a life altering event that can have implications for an individual's and spouse's financial, physical and emotional well-being for the rest of their lives. Unlike most of the decisions we face, this one, the choice to leave an established position in an organization, is usually final.

Jeff Bezos of Amazon characterizes this one type of decision as both "consequential and irreversible or nearly irreversible" as one-way doors. He emphasizes that "these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don't like what you see on the other side, you can't get back to where you were before." Sensible people will conduct a thorough and unemotional analysis of the tradeoffs of working vs. retiring and then determine their willingness and ability to accept those tradeoffs before they decide to begin retirement.

According to an article titled Psychological Research on Retirement in the periodical Annual Review of Psychology, authors Mo Wang and Junqi Shi identify three phases in the retirement process. First is the planning stage where the individual begins imagining a life without work, discussing his or her plans with family, friends and colleagues. The goal is to get feedback and help establish some general expectations for life in retirement. This stage often includes financial planning to determine if there is sufficient income (Social Security, employer pension, etc.) and assets to maintain the lifestyle they want. Second, as retirement gets closer, comes the decision-making phase where the person starts putting specific plans into action such as establishing an exit date from the job, weighing when to take Social Security, evaluating Medicare and other health care options, etc. Wang and Shi define the third phase as "retirement transition and adjustment” from full-time worker to retiree. The most prominent component of this adjustment process involves changes in daily activity or, in other words, how to spend their time. How much will be devoted to leisure activities, volunteer work, caring for family or perhaps part-time work?


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