As more and more baby boomers approach retirement, the financial industry is preparing to help them decide if they’re ready. It’s long been thought to be a fairly straightforward calculation based on age and savings. But, it turns out, that premise is flawed.

Finances may play less of a role in deciding when to leave the workplace than previously understood, according to two recent retirement research papers.

Factors that affect the decision to retire relate more to job satisfaction, according to a brief by Steven Sass, an economist at the Center for Retirement Research at Boston College. Sass found that on-the-job experience and the allure of retirement activities both play big parts in keeping some workers in the workforce while pulling others into retirement.

“Economists have traditionally thought retirement was a financial calculation,” Sass said in an interview with Capital Ideas. But “nonfinancial considerations clearly contribute to the decision to retire.”

Workers who enjoy working are more likely to remain employed longer because “employment promises greater opportunities to meet personal objectives,” Sass noted, citing research by economists Ruby Brougham and David Walsh.

On the other hand, those who believe retirement offers a chance to spend more time with family, for instance, find greater satisfaction in retiring early. In one comparison, employees who planned to retire at 63 — two years earlier than the median — viewed retirement as providing better opportunities for achieving personal growth, meaningful relationships and a strong identity, according to the research.

Early Retirement Offers Some Workers Better Opportunities to Pursue Life Goals Than Staying On the Job

Even stock market performance can have little to do with retirement decisions — a notion that goes against many experts’ theories following the 2008 financial crisis.

Only huge long-term moves alter individuals’ decisions to retire, and that’s true almost exclusively for the well-educated portion of the population, according to “Recessions and Retirement, How Stock Market and Labor Market Fluctuations Affect Older Workers,” a study by Wellesley College professors Courtney Coile and Phillip B. Levine. Single-year rises or drops in the S&P 500 have no significant effect on retirement rates, the researchers found.


“If the market is in a slump for a prolonged period of time, that can have an impact in (delaying) retirement for a segment of the population with a higher income,” Levine said in an interview with Capital Ideas. “But it’s not a large segment of the population.”

Bringing Finances Into the Decision

Workers who place greater emphasis on nonfinancial factors can get into trouble, as they may not be financially prepared for retirement, Sass suggested.

“Few workers are equipped even to estimate the financial implications” of exiting the workforce too soon, he wrote. “This inability raises the prospects of many workers being pulled out of the labor force too early to gain a financially secure retirement.”

Or having to work longer when they realize they aren’t financially prepared. For those older Americans who remain in the workforce, there are options, such as catch-up contributions. For 2015 and 2016, most 401(k) plan participants 50 and older can contribute up to $6,000 per year beyond the maximum $18,000 elective deferral.

Growth in tax-deferred funds also can contribute substantially for those who choose to work longer. In addition, claiming Social Security retirement benefits on an early or delayed basis can dramatically affect the monthly benefit amount. Retiring at age 70 versus age 62 increases the monthly Social Security benefit by about 75%, according to the Society of Actuaries.

Another option for some employees is choosing to stay in their retirement plans after they retire – or, as is increasingly the case with baby boomers, partially retire. Over 57% of plans now offer installment or partial withdrawals at retirement, according to the Plan Sponsor Council of America’s 2015 survey of profit-sharing and 401(k) plans.

Every day, 10,000 baby boomers become eligible for retirement and are faced with the choice of whether to stay in the workforce or exit. While an ideal evaluation should include a review of personal savings and life expectancy, many workers would rather base the decision on their job experience. Combining the two – retirement savings and job factors – without getting bogged down in broader market moves may be the smartest way to approach the decision.