Money vs. Time
Is freedom in retirement more important, or is having enough money? The answer might surprise you. A new survey reveals that money and financial pressures don't influence when people choose to retire as much was first thought. For many, it isn't just about money, but about the freedom to enjoy life.
Is freedom in retirement more important, or is having enough money?
The answer might surprise you.
A new survey reveals that money and financial pressures don't influence when people choose to retire as much was first thought. For many, it isn't just about money, but about the freedom to enjoy life.
That's just one finding in a 2015 survey of 9,372 pre-retirees and 2,293 retirees (plus 451 people who plan never to retire) by Fidelity Investments, with the Stanford Center on Longevity.
Financial factors and work are primary reasons why people stay at their professions. And eligibility for Medicare and Social Security is a key factor behind retirement, the survey found.
But more often, nonfinancial factors such as family, health, and lifestyle ultimately prompt people to retire, the Fidelity/Stanford survey found.
Among retirees, 72 percent chose leisure as a very strong or somewhat strong reason to retire, 64 percent blamed stress at work, and 62 percent cited a desire to spend more time with grandchildren.
"There seems to be a values shift as people near retirement," Stanford researcher Steve Vernon noted. "Even if they haven't reached their retirement goal in dollar terms, many desire freedom over money.
"It's the first time many can actually breathe and live life," he added.
Fidelity found three distinct phases of "preretirement" - not rooted in age, but in stage of life:
In early preretirement (10 or more years out), most people still have significant debt, aren't sure their money will last, or still have children and/or aging parents to support. People in this stage are generally in good health, happy with their jobs, and look forward to professional challenges.
In mid-preretirement (two to nine years out), people are starting to reduce debt, are less responsible financially for their children, and are feeling as if they might be able to make their money last throughout retirement. Meanwhile, their professions plateau. They may still like their jobs, but find themselves more interested in free time for leisure and family.
By late preretirement (less than two years out), "priorities shift. People often feel more job-related stress, and no longer look for new job-related opportunities - they've effectively put their resume to bed. Many feel that their physical stamina declines along with their mental sharpness. They really want more time for leisure and family," the survey found.
Another reality? Women suffer more from claiming Social Security early, according to a report this month out of Boston College's Center for Retirement.
The policy background: In 2000, Americans started claiming Social Security benefits sooner, after the earnings test was lifted for those who reach full retirement age. Since then, some have worked longer - as Congress intended.
But it is more common that people claim benefits earlier than they would have prior to the policy change. (The earnings test remains in place for beneficiaries younger than the full retirement age - 66 for most baby boomers.)
Earlier claiming results in smaller monthly Social Security checks and especially hurts elderly widows, researchers at the U.S. Treasury Department and the University of California at Irvine have found.
After a husband dies, two benefits checks coming into a household are reduced to one. Although a widow receives the larger of a couple's two checks - typically the husband's - it may not be sufficient to maintain her standard of living. The share of women in their late 70s with incomes below 200 percent of the U.S. poverty line has increased from about 8 percent to more than 11 percent.
Women claimed Social Security benefits months earlier than they otherwise would have, the research shows. By one estimate, women who were 69 in 2000 claimed Social Security 6.5 to 7.8 months earlier. The result: lower annual benefits of about $650 to $800, according to the researchers' estimates.
Results were similar for the husbands in married couples: They also tended to claim benefits earlier, leading to lower annual benefits for the couple of about $1,500.
(Find the study in the National Bureau of Economic Research's monthly digest, http://www.nber.org/digest/dec15/w21601.html.)
This month, the Pew Charitable Trusts released a state-by-state breakdown of who has access to retirement plans. According to data compiled by Pew, today only about 50 percent of workers participate in a workplace retirement plan.
Overall, 58 percent of workers have access to a plan, but only 49 percent participate.
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