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When to Retire: It’s Not Just About the Money

A study says workplace environment, flexibility and job benefits are also key factors


(This article appeared previously on MarketWatch.com.)

Despite all the books, articles and angst devoted to the question of “how much money is enough to retire,” a new study finds that the size of one’s savings account is not the most important piece of the retirement decision.

 
Job characteristics and the work environment play a big role in the timing of people’s retirement, as do, to a lesser extent, personality traits — irrespective of whether the retiree is financially prepared, how much education he or she may have and other demographic traits, according to the study published by the University of Michigan’s Retirement Research Center.
 
“Typically, when we talk about retirement decisions, we put emphasis on financial incentives and on health issues, but several other work-related factors may be affecting the individual decision to retire,” said Marco Angrisani, a co-author of the report, an associate economist at the University of Southern California’s Center for Economic and Social Research, and an adjunct economist at RAND Corp.

(MORE: Money Moves If You're Forced to Retire)
 

"Job characterisics are part of this story, because they make work more or less pleasant, they provide incentives to work and they may actually boost the proclivity to work" he said.

Perceptions of Discrimination Affect the Decision

Even after controlling for financial preparedness (household income and wealth) and other demographic factors, job traits — such as the perception of age discrimination, the perception that work interferes with one’s personal life, and relationships with co-workers and supervisors — all play into the retirement decision.

 
“The decision to retire is not only driven by the availability of a pension, by pension rules, by Social Security rules, by monetary incentives — but it’s also driven by other characteristics that are not monetary,” Angrisani said.
 
For example, a more physical job means you’re likelier to shift to part-time or retire, while a job that largely entails computer work is correlated with staying in the workforce full-time, according to the research.

(MORE: Semi-Retirement Jobs With Great Benefits)

 
The study focused on full-time workers aged 51- to 79-years-old and revisited them for a number of years to see whether they continued working, shifted to part-time, lost their job or retired. The study excluded self-employed workers, as well as disabled workers. See the full September 2013 report here.

Study Captures Feelings About Work 
 
To get at how people feel about their jobs, the researchers asked people to characterize their feelings about work, as opposed to basing job characteristics on typical aggregate job data (where one job category might be labeled “high stress” and another one “physical”). The study thus captured situations where a worker perceives his work as, say, stressful, even if he’s in a job type that isn’t generally considered stressful.
 
Not surprisingly, the availability of health insurance is a big determinant in the decision to retire.

(MORE: When a Money Writer's Health Policy Was Canceled)

 
If health insurance is available through work, “then the likelihood of remaining in full-time employment is way higher and the likelihood of going to part-time is way lower,” Angrisani said. (The research was conducted before the availability of health insurance under the Affordable Care Act.)

Age Discrimination Can Prompt Early Retirement
 
A perception of age discrimination has the opposite effect. “Take two individuals who are equally prepared financially for retirement. They have the same household wealth and the same household income. If one, for instance, is in a job where there is a perception that there is age discrimination, then this person is more likely to retire than the other one,” he said.
 
Workplace flexibility also plays a role. “If the individual wants but cannot reduce hours of work, then the likelihood of remaining in full-time employment is way lower and the likelihood of retiring is higher,” he said. “A good relationship with co-workers and with supervisors both have a strong effect on the likelihood that these individuals remain in full-time employment, and a strong effect but negative on the likelihood that they move to part time.”
Personality Plays a Part
 
With some exceptions, a worker’s personality traits — such as being outgoing, conscientious or nervous — don’t directly affect retirement decisions, but they have an indirect effect, according to the study.
 
It’s likely, Angrisani said, that “personality traits induce people to select into particular jobs with some characteristics, and ultimately these characteristics will have an effect on retirement decisions.”
 
And in specific situations, our personalities may play a role in our retirement decision. For example, the research found that different personality types deal with age discrimination differently. People who described themselves as conscientious were likelier to stay on the job even in a climate of discrimination.
 
“If people perceive age discrimination, then they are less likely to remain in full-time employment — but this negative effect vanishes if individuals are very conscientious. Somehow, these guys are more tolerant,” Angrisani said.

'Active' Workers Less Concerned with Salary 
 
Another way personality affects our retirement decisions: While wages play a role in the desire to retire — if your wages aren’t high you’re likelier to retire — this effect is reduced among people who describe themselves as active.
 
“A person who says he is very active, for this person the importance of the wage is somewhat lower. He could get a slightly lower wage than a guy who is not that active and remain in full-time employment,” Angrisani said. “Active people are less sensitive to this monetary incentive, the hourly wage. They define themselves as active, so they probably have a taste for work.”

Andrea Coombes is a personal-finance writer and editor in San Francisco. She's on Twitter @andreacoombes.

 

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