endobj xref "Try It, You'll Like It: The Influence of Expectation, Consumption, and Revelation on Preferences for Beer." Specifically, when individuals consider the benefits of leaving the workforce, unrealistic expectations of the positive impact that retiring would have on their future happiness, as well as incorrect estimates of how long this enjoyment would be expected to last, may sway potential retirees toward early retirement. Second, when potential retirees decide that they want to retire, they are earning an income that will not exist once they leave the workforce. While SSA is moving away from using break-even analyses, calculating the break-even age remains common practice in the private sector (for example, MetLife (2010)). Hyperbolic discounting helps to describe individuals' behavior in a variety of decision contexts in which a larger, later reward is pitted against a smaller, sooner reward. In one experiment, Wilson and others (2000) asked participants to write down in a prospective "diary" how much time they might spend performing a number of everyday activities on a specific date in the future. Likewise, some individuals may start to receive benefits as soon as possible because they have been "forced" into retirement, either as a result of a layoff or a buyout offer from their employer. exacerbating problems even further. However, it is precisely this type of contingency planning in which individuals must engage in order to make the best retirement decision for themselves and their families. Imagining obtaining tenure (Gilbert and others 1998) or witnessing your favorite sports team win an important game (Wilson and others 2000) most likely produces stronger positive feelings than do the events themselves. EBRI Issue Brief No. prolonged period of very low interest rates — making income generation on a fixed retirement portfolio extremely difficult. 2007 Minority Retirement Confidence Survey Fact Sheet. Boston, MA: Center for Retirement Research at Boston College. The Quarterly Journal of Economics 112(2): 375–405. Social Security Bulletin 64(2): 66–91. http://www.mrrc.isr.umich.edu/publications/papers/pdf/wp210.pdf. Poor physical or mental health of the worker or family members who need the worker’s help, An employer’s business is downsizing or closing, The financial costs to continue working exceed the financial gain, Pressure by employer (or self) to retire because of not keeping up with the work load or advancements related to the job, Having saved enough money and no longer being dependent on a paycheck, Believing that at a certain age, one is expected to retire and to start a new stage of life. Most notably, the decision to stop working is accompanied by the loss of a worker's preretirement income, leaving the retiree to garner funds from other sources. In addition to expounding on communication efforts, findings from behavioral decision-making research can also generate novel ways to approach issues surrounding the retirement decision. Journal of Personality and Social Psychology 39(5): 806–820. TRENDS in Cognitive Sciences 10(1): 31–37. Consider other family members' needs if they are dependent on you or actively involved in your life, and what impact your retirement may have on them. Pre-retirement involves moving from retirement seeming far off to making definite plans for retirement. 2008. 0000041676 00000 n Interestingly, that report also indicated that those who were "not at all satisfied" with their jobs were especially likely to have reported having only thought about the retirement decision for 6 months. What individuals fail to realize, however, is that humans possess a remarkable ability to adapt to negative situations. 0000008743 00000 n 35. Create your account. ———. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior." Just as potential patients mentally simulate the experience of getting a colonoscopy or mammogram before deciding whether to make an appointment, potential retirees very likely mentally simulate what retirement would be like before deciding to retire or not. In addition, because one's Social Security benefit is based on his or her 35 highest-earning years, the additional years of work, which may include high-earning years, could increase the benefit amount. JDM research dealing with the impact of expectations on individuals' judgments and decisions (for example, Lee, Frederick, and Ariely (2006)) may suggest that individuals' expectations about retirement can have important consequences for their retirement decisions (Lusardi 1999); among other things, expectations can lead to the establishment of reference points, or starting points, which may affect the decision of when to retire. 1994. Psychological perspectives on the changing nature of retirement. In addition to the anchoring effect that appears to take place in the consideration of one's retirement age, there is also evidence that the ages on which people anchor serve as reference points (Kahneman and Tversky 1979b). 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psychological impact of retirement

A Systematic Review." http://www.metlife.com/individual/financial-tools/social-security-tool/sscalc.swf. 1987. People in this stage have a routine and feel comfortable with their lives. Importantly, individuals exhibit immune neglect (Gilbert and others 1998; Wilson and Gilbert 2003), which means that they do not appreciate the ability of their psychological immune systems to help them recuperate from negative events, nor do they appreciate that ability in others. Although the retirement decision occurs late in life, it can significantly affect an individual's well-being for many years. As mentioned in the previous section, it is also crucial that individuals try to anticipate what events may occur during retirement; but often such events, like an illness or the death of a loved one, can be distressing. This website is produced and published at U.S. taxpayer expense. Immune neglect becomes evident when friends are shocked to find that a recently divorced peer has started dating so quickly after the split. One of the most important issues is to view retirement as a developmental process that should be considered and planned for as opposed to making a spontaneous decision to cease employment without having made any preparations, It is never too soon to plan financially for retirement. flashcard sets, {{courseNav.course.topics.length}} chapters | Gilbert, Daniel T., and Timothy D. Wilson. Chen, Yung-Ping, and John C. Scott. Related to the interaction between leaving the workforce and claiming Social Security benefits is the relationship between a retiree's claiming age and the resulting benefit amount. 2006. This is the crux of precommitment strategies so often used in situations requiring self-control. Sass, Steven A., Wei Sun, and Anthony Webb. "Aspects of Endowment: A Query Theory of Value Construction." The claiming decision for individuals who must leave the workforce early citing poor health or a layoff very likely depends entirely on their financial condition. As a member, you'll also get unlimited access to over 83,000 Thinking of Retiring? study "Social Norms, Rules of Thumb, and Retirement: Evidence for Rationality in Retirement Planning." Detection and empathy means more holistic relationship-building and ultimately, guidance toward a more secure future. | 16 Some individuals have saved large sums of money by the time they retire, and others have workplace pensions from which to draw funds; some retirees have both sources of income, but some retirees have neither. Impact bias broadly describes individuals' tendency to overestimate both the intensity and the duration of emotions that may result from a particular future event (Wilson and Gilbert 2003). When wrestling with anxiety or intense feelings about big issues like retirement, people often retreat from decisions. 133 0 obj <> endobj xref "Try It, You'll Like It: The Influence of Expectation, Consumption, and Revelation on Preferences for Beer." Specifically, when individuals consider the benefits of leaving the workforce, unrealistic expectations of the positive impact that retiring would have on their future happiness, as well as incorrect estimates of how long this enjoyment would be expected to last, may sway potential retirees toward early retirement. Second, when potential retirees decide that they want to retire, they are earning an income that will not exist once they leave the workforce. While SSA is moving away from using break-even analyses, calculating the break-even age remains common practice in the private sector (for example, MetLife (2010)). Hyperbolic discounting helps to describe individuals' behavior in a variety of decision contexts in which a larger, later reward is pitted against a smaller, sooner reward. In one experiment, Wilson and others (2000) asked participants to write down in a prospective "diary" how much time they might spend performing a number of everyday activities on a specific date in the future. Likewise, some individuals may start to receive benefits as soon as possible because they have been "forced" into retirement, either as a result of a layoff or a buyout offer from their employer. exacerbating problems even further. However, it is precisely this type of contingency planning in which individuals must engage in order to make the best retirement decision for themselves and their families. Imagining obtaining tenure (Gilbert and others 1998) or witnessing your favorite sports team win an important game (Wilson and others 2000) most likely produces stronger positive feelings than do the events themselves. EBRI Issue Brief No. prolonged period of very low interest rates — making income generation on a fixed retirement portfolio extremely difficult. 2007 Minority Retirement Confidence Survey Fact Sheet. Boston, MA: Center for Retirement Research at Boston College. The Quarterly Journal of Economics 112(2): 375–405. Social Security Bulletin 64(2): 66–91. http://www.mrrc.isr.umich.edu/publications/papers/pdf/wp210.pdf. Poor physical or mental health of the worker or family members who need the worker’s help, An employer’s business is downsizing or closing, The financial costs to continue working exceed the financial gain, Pressure by employer (or self) to retire because of not keeping up with the work load or advancements related to the job, Having saved enough money and no longer being dependent on a paycheck, Believing that at a certain age, one is expected to retire and to start a new stage of life. Most notably, the decision to stop working is accompanied by the loss of a worker's preretirement income, leaving the retiree to garner funds from other sources. In addition to expounding on communication efforts, findings from behavioral decision-making research can also generate novel ways to approach issues surrounding the retirement decision. Journal of Personality and Social Psychology 39(5): 806–820. TRENDS in Cognitive Sciences 10(1): 31–37. Consider other family members' needs if they are dependent on you or actively involved in your life, and what impact your retirement may have on them. Pre-retirement involves moving from retirement seeming far off to making definite plans for retirement. 2008. 0000041676 00000 n Interestingly, that report also indicated that those who were "not at all satisfied" with their jobs were especially likely to have reported having only thought about the retirement decision for 6 months. What individuals fail to realize, however, is that humans possess a remarkable ability to adapt to negative situations. 0000008743 00000 n 35. Create your account. ———. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior." Just as potential patients mentally simulate the experience of getting a colonoscopy or mammogram before deciding whether to make an appointment, potential retirees very likely mentally simulate what retirement would be like before deciding to retire or not. In addition, because one's Social Security benefit is based on his or her 35 highest-earning years, the additional years of work, which may include high-earning years, could increase the benefit amount. JDM research dealing with the impact of expectations on individuals' judgments and decisions (for example, Lee, Frederick, and Ariely (2006)) may suggest that individuals' expectations about retirement can have important consequences for their retirement decisions (Lusardi 1999); among other things, expectations can lead to the establishment of reference points, or starting points, which may affect the decision of when to retire. 1994. Psychological perspectives on the changing nature of retirement. In addition to the anchoring effect that appears to take place in the consideration of one's retirement age, there is also evidence that the ages on which people anchor serve as reference points (Kahneman and Tversky 1979b).

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