Retirement has long been a part of the American dream. Throughout the twentieth century, the belief was that after a lifetime of hard work, workers could retire and enjoy their golden years. When defined benefit pensions were still common in the private sector, retirement was an easier goal to achieve. In recent years, however, the timing and reasons for workers to retire has changed. A study last year from Willis Towers Watson sheds some light on why workers retire when they do.
Willis Towers Watson surveyed more than four thousand retirees for their study. The survey respondents retired across almost 35 years — from the 1980s through 2014 — which allowed Willis Towers Watson to assess how the motivations to retire have changed over time. One of the most interesting findings of the survey is that the primary reason for retirement has shifted from one focused on employer-provided retirement incentives to one focused on personal reasons. In the 1980s, 41 percent cited employer retirement incentives, such as a pension plan, as their main reason to retire. That percentage was down 14 points to 27 percent by the 2010s. Conversely, the number citing personal reasons, such as health issues, increased 14 points from 25 percent to 39 percent over the same time period.
Eligibility for programs such as Social Security and Medicare has also increased as a reason for a worker to retire compared to the 1980s. In fact, three times as many retirees cited their eligibility for these programs as a reason to retire as did retirees from the 1980s. This seems to indicate that as employer provided retirement benefits have become less generous, e.g., the shift from pensions to 401(k)s, participating in Social Security has only become more important for retirees.
Finally, an increasing number of retirees cited the work environment as a reason to retire. Almost a quarter of retirees felt they were “pushed into retirement.” Many also cited disengagement with their work as a motivation to retire. The Willis Towers Watson authors speculate that changing technology is eroding relevant work skills for older workers, which is leading to this increased sense of disengagement.
This report reveals that there are many different reasons why people retire and these reasons can change over time. Employer retirement incentives, such as pension plans, remain a very important reason that many workers retire; however, these incentives are somewhat less important now than they used to be. We frequently talk about the importance of defined benefit pensions for recruiting and retaining public employees, but pensions are also important for facilitating the transition to retirement at the appropriate time. Pensions are a valuable workforce management tool and giving workers a reason to retire is part of that.