This study examined retirement-related thinking, experiences, and behaviors in the face of the unexpected, combining two methods: 50 in-depth interviews with individuals and couples (approximately half recently retired and half nearing retirement) and a national survey of 1,007 individuals ages 50 to 70 (both retired and pre-retired).
Personal retirement expectations vary from individual to individual, and retirement planning is generally built on those individual expectations. However, it is not generally built on the unexpected. The study reveals that the capacity to withstand the unexpected is dependent upon the capacity of individuals to imagine, anticipate, and prepare for circumstances that are sometimes well beyond their control.
Key Findings – quoting from the study….
Retirement timing is not a simple equation of the “lure” of retirement vs. the “pull” of work. There are multiple ways and complex influences through which retirement timing can be thrown “off schedule.”
Declining or stagnant income or loss of job. Loss or erosion of pension. Catastrophic illness or disability. Loss of health insurance, or escalation of health care costs. Death of a spouse. Caregiving demands.
Only two in ten individuals report that they are “very confident” that they will have enough money to live comfortably if they or their spouses/partners live to 85+ years of age, and another six in ten (58%) are only somewhat confident.
Confidence in retirement security is most strongly related to the presence or sufficiency of a guaranteed stream of income (68%) and adequacy of savings (51%). Alarms about retirement risks do not inevitably or immediately prompt retirement planning. Several styles of thinking about the future suggest that people are not easily awakened to retirement risks. Paradoxically, alarms may produce inaction rather than action. The study characterized people as follows:
- Snoozers, who don’t think about future risks at all.
- Active Resisters, who “choose to snooze,” or choose to ignore information about future risks.
- Immobilized Worriers, who understand future risks but whose worry prevents them from acting.
- Oversleepers, who are late in their thinking and planning, and may regard their decision or action windows as “come and gone.”
- Wood Knockers, who think about the unexpected but rely on hope; they choose optimism. Somehow, things will “work out.”
- Plan B-ers, who hold on to a contingency plan, or the loose idea of one, as a protection against trouble ahead. A Plan B may be a “plan” in name only.
- Realists, who use the lessons of past experience to think about the future.
- Stewers and Brewers, who take a while to make decisions.
- Compromisers, who think about both today and tomorrow and balance their current needs against future risks.
- Preemptive Planners, who strive to preempt future risks, or at least their consequences.
Thinkers about the unexpected may not necessarily fall neatly into one of the above types or another, and if they do, they may not stay there. Each individual may have pieces of one type or another, or change from one time to another.
Tenuous health care coverage, long-term care costs, eroding defined-benefit pensions, the vagaries of the stock market – these are on the minds of potential retirees.
So where do you fit?
According to the researchers, there is no single road to retirement security. There are too many variables to suggest a universal package, yet even a simple contingency plan framework can be very helpful.