A Better Way to Plan for Retirement
April 10, 2013
by Suzanne Bouffard
When it comes to planning for your retirement, you should have a laser-like focus on saving money, right? Wrong, says organizational psychologist Mo Wang. Other factors matter just as much as the amount of money you have saved. But according to Wang, most Americans aren’t focusing on the real keys to health and happiness in retirement.
Retirees need relationships with friends and family, good physical and mental health, habits like perseverance, and opportunities to be productive, Wang says. His research has found that retirees are more satisfied when they continue working in a reduced capacity and have a spouse who is also retired. Retirees tend to be less satisfied, at least initially, when they are in unhappy marriages, experience health problems, or retire earlier than expected.
“There is no one golden reason that people will adjust well or poorly to retirement,” Wang says. “The whole resource pool has to be balanced.” For example, even though they have less money to spend, retirees may be happier than they were before retirement because they have more time to spend with friends or to play tennis.
Wang says that employees need to plan ahead for these non-financial factors. He recommends that people considering retirement ask themselves three questions: what will I do, where will I live, and when will I retire?
Although it may seem surprising, Wang’s research suggests that people should consider staying involved in their work after retirement. He has found that retirees are generally healthier when they keep working in part-time or transitional “bridge” employment – and they tend to be happier when they continue working in their pre-retirement field.
What about the “retirement dream” you see in TV ads with couples relaxing on the beach or opening antique shops? That’s not the norm, and according to Wang, it shouldn’t be. “The notion of pursuing your dream in retirement is a nice image,” he says, but it isn’t reality for the vast majority of people. Most people who change fields in retirement do so because they have to, research shows. In contrast, those who continue in their pre-retirement fields usually reap benefits like staying connected to colleagues, feeling knowledgeable and productive, and maintaining a key part of their identities, he points out.
In deciding where to live, Wang says that retirees should consider whether they will have access to bridge employment opportunities, healthcare facilities, and social connections. Popular retirement spots, he points out, are often lacking in one or more of those things.
As for timing, he says, “It’s not about the magic number of 67. The timing has to make sense in terms of how it matches your spouse’s timing and what you are trying to accomplish in your career before and after retirement.”
Wang believes that employees shouldn’t be expected to do all of this planning on their own. Employers and community organizations should sponsor retirement planning sessions that go beyond finances. Group sessions can be especially effective, he says, because they create social connections and support among participants.
Is there a role for government policy? Yes, says Wang, in the form of tax credits for employers who offer planning sessions and in encouraging retirees to enroll in healthcare coverage. He says that policymakers should also think about how legislation will affect retirees psychologically. For example, he says that the government needs to provide plenty of notice to and support for workers before raising the eligibility age for collecting social security, because his research has found that retirees fare better when they retire at around the time they expected to.
Because no two people are exactly alike, no two retirement experiences are the same, Wang says. His research suggests that it’s time for retirement planning to reflect that.
Mo Wang was recently honored with the Federation of Associations in Behavioral & Brain Sciences (FABBS) Foundation Early Career Investigator Award during the annual meeting of the Society for Industrial and Organizational Psychology.