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Is 65 Too Soon To Retire? 40% Say Yes.

You’re born, you go to school, and then for 40 or 50 years you work, until, one day — like free falling from whatever mountain you’ve climbed, back to the plains — you retire.

It’s a big change, and a sudden one. Is this the way people want it?

Both theory and observational data suggest not: People prefer life to be “smoothed,” in the language of economists. “We don’t eat all of our meals on Sunday and then starve on weekdays,” says Christopher Tonetti, an associate professor of economics at Stanford Graduate School of Business. We spread out experience; we seek transitions. “And not just for food, but for all consumption.”

Retirement, it turns out, is no exception to this preference.

In a new study conducted with five colleagues, Tonetti found that a majority of retirees would prefer to be working if they could find a job that afforded some flexibility. Though questions remain about why they want to remain employed and what impedes the return to the workforce, the findings, were unambiguous:

A lot of people who are

sitting at home not working

want to be working.

Quantifying the Desire to Work -

To pin down this result, Tonetti and his colleagues gathered employment and retirement information on 1,771 older Americans and then probed their interest in going back to work with a series of strategic survey questions.

The questions presented detailed hypothetical scenarios about prospective job opportunities: Would you, for instance, return to a job that was identical to your previous employment in every way? What if the hours afforded more flexibility or the wage was slightly lower? If respondents rejected the offer, then the survey asked for what’s known as their reservation wage — that is, the lowest salary at which they would accept the job.

Tonetti saw striking numbers: Almost 40% of those who were surveyed would return to work if offered a job with the same hours and same wage as their last position. Perhaps more surprising, almost 30% of workers would have forgone retirement entirely and continued to work at a job identical to their old one if given the chance at the time of their retirement; in retrospect, retirement came too soon.

The Importance of Flexibility -

These percentages shot up dramatically when retirees were given the choice of resuming work with flexible hours. (In the survey, “flexible” implied regular, but not necessarily full-time, work; it didn’t mean you could simply wake up one day and decide not to work.)

The researchers found that almost 60% of the people surveyed would return to work if the job offered a flexible schedule. Not only that, but 40% of them would take a 10% wage cut, and 20% would accept a 20% wage cut under these conditions. These results were relatively consistent regardless of age or level of wealth. (The survey focused on people who were, in general, wealthier, healthier, and more educated than the U.S. population on average.)

The general finding that people who have retired are willing to go back to work met Tonetti’s expectations, but the importance of flexibility and the size of the numbers that he found went beyond what he predicted. “That so many people were willing to go back to work even if you give them a 10% wage cut — I found that surprising,” he says.

The Cost of Too Much Retirement -

The obvious question, then, is why people who are willing to work aren’t working. Tonetti says that answering this requires looking to the demand side of the equation; that is, the companies that employ people. We need to understand why firms don’t seem to find it profitable to hire older people, even at wages that are lower than they used to earn, and why they don’t seem to want to offer part-time or flexible schedules. Tonetti says. “Getting managers, or HR, to truthfully and accurately discuss hiring and continued employment practices for older workers — that’s a very tricky thing to do.” He and his team have not yet tackled this piece of the puzzle.

Having that discussion, though, would be more than an academic exercise. The Baby Boomers are aging, and keeping people employed, even part-time, may be one way to reduce the immense financial strain now settling on federal programs like Social Security and Medicare. Exactly how policymakers might address this gap between the desire to work among retirees and the options that are available requires further study. According to Tonetti, this paper takes off the table the notion that older people don’t want to work.


Stanford Graduate School of Business

Read original article "Shoved Off The Retirement Cliff?"




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