Retirement Security: It’s Not Just About the Money

The issue of retirement security gets frequent attention in the media, for the simple reason that many workers are not building the financial resources that they will need to maintain an acceptable standard of living after their retirement. As much as financial planners and media tell workers that their retirement income should meet or exceed about 70% of their preretirement income (replacement rate), many Americans will fall far short. The expectations of employers in helping their employees to build retirement wealth are spelled out in laws such as ERISA, and pensions exceeding those minimums are one of the most frequently sought-after benefits among employees.

Investment in Psychological Security Post-Retirement

With all the attention paid to financial retirement security, psychological retirement security has gotten short shrift. In American culture, paid employment is a central part of many people’s identities—a way through which they are a contributing member of their families and society. But, retirement security isn’t just about money — it’s also about meaning and identity. Even those who say they hate their jobs often find meaning or purpose in bringing home a paycheck. What happens when that disappears?

Retirement can be a shock for workers who do not have enough resources to replace the psychological benefits that they got from work. Workers are constantly told to diversify their financial investments, but almost never warned that they should diversify their psychological investments, as well. How can workers be better prepared to replace both the financial and psychological benefits of paid employment?

Many workers are answering this question partly by staying in the workforce longer.  Some continue a successful career, while others move into retirement by scaling down their responsibilities gradually. Many seek bridge jobs to transition from full-time jobs to retirement. Gradual retirement, under the best of circumstances, can create a window of opportunity during which workers can build their financial and psychological retirement security. On the financial side, they may benefit from income and health insurance, among other benefits, from their less-demanding paid jobs. On the psychological side, they can explore new interests and roles—such as caregiving and volunteering — without disconnecting entirely from the psychological benefits of work. This can help them to remain engaged in productive activities as they age.

The Benefits of Bridge Policies

The sad truth, however, is that not all workers have good options for gradual pathways out of the labor force. Many older workers face long-term unemployment and, when older workers leave their jobs, their new jobs are often much less desirable in terms of benefits and pay. Others have to decide between retiring abruptly and continuing full-time because their employer doesn’t offer other options, and because part-time options in their field are limited. Employers who offer bridges between a full workload and full retirement can be a powerful force in building their employees’ financial and psychological security.

Many employers would support “bridge” policies, such as phased retirement, simply to do the right thing for their employees. But employers also have a vested interest in adopting these policies. Gradual retirement can build in time for succession planning, knowledge management, and retention of the valued skills and abilities of older workers. Yet, evidence suggests that the business community greatly undervalues bridge policies. For instance, the 2015 Talent Management study conducted by the Center on Aging & Work found that the leaders of American organizations typically are less committed to options for post-retirement-age work than they are to other benefits, such as training and development or competitive pay.

For employers
Benchmark yourself against similar employers in options for continued work and retirement, as well as other policies, and get customized tips: Workforce Benchmark Tool.

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About Flexible Work Options: Quick Insights from the 2015 Talent Management Study