Does the Option of Continued Work Later in Life Result in a More Optimistic View of Retirement? Kevin E. Cahill The Center on Aging & Work at Boston College Deborah Smeaton Policy Studies Institute Andrea Principi Marco Socci Sara Santini INRCA – Italian National Institute of Health & Science on Ageing November 22, 2015 Gerontological Society of America’s 68th Annual Scientific Meeting Orlando, Florida This work was supported by the Lifelong Health and Wellbeing Cross-Council Programme. The LLHW Funding Partners for this award are the Economic and Social Research Council and the Medical Research Council [grant number ES/L002884/1]. We would also like to acknowledge and thank the research participants who kindly gave their time and shared their experiences, thoughts, and expectations about work and retirement.

Agenda Overview Background Data and Methods Qualitative Interviews Quantitative Analysis of HRS Data Key Findings Limitations Conclusions

Overview Research objective: This paper explores the link between work options and individuals’ views about retirement and overall well-being. Motivation: Older workers in America exit the labor force gradually and continue working at older ages. At the same time, older Americans’ views about retirement are generally positive. Policymakers may be interested in the potential positive impacts of promoting continued work later in life. Data: 133 qualitative interviews in US (38), UK (55), and Italy (40); and 3,705 observations from the Health and Retirement Study (HRS). Conclusion: Optimism about retirement is related to the optionality of work later in life, but the link depends in part on whether work is a choice or a necessity.

The Evolving Retirement Income Landscape in the United States Changes have occurred to each of the three pillars of retirement income in ways that favor work over leisure. Further, we have entered a new world of retirement income security in America, with older individuals more exposed to market risk and more vulnerable to financial insecurity than prior generations. Retirement income security now often requires earnings from continued work later in life. Fortunately, older Americans have responded to this new reality and are now working at rates not seen since the mid-1970s. Source: Cahill, Kevin E., Michael D. Giandrea, and Joseph F. Quinn. 2015. Evolving patterns of work and retirement. In L. George & K. Ferraro (Eds.), Handbook of Aging and the Social Sciences (8th Edition). New York, NY: Elsevier.

Early Retirement: ~100 Year Trend Average retirement age of men in the US, 1910 to 1985 Source: Quinn, Joseph F., Kevin E. Cahill, and Michael D. Giandrea. 2011. “Early Retirement: The Dawn of a New Era?” TIAA-CREF Institute Policy Brief (July).

The End and Reversal of the Trend Average retirement age of men in the US, 1973 to 2014 Source: Quinn, Joseph F., Kevin E. Cahill, and Michael D. Giandrea. 2011. “Early Retirement: The Dawn of a New Era?” TIAA-CREF Institute Policy Brief (July); updated with BLS Employment and Earnings.

Retirement as a Process (not an event) Source: Cahill, Kevin E., Michael D. Giandrea, and Joseph F. Quinn. 2015. “Retirement Patterns and the Macroeconomy, 1992 – 2010: The Prevalence and Determinants of Bridge Jobs, Phased Retirement, and Re-entry among Three Recent Cohorts of Older Americans.” The Gerontologist; 55(3), 384-403; doi: 10.1093/geront/gnt146.

Supplementing the Qualitative Data with the HRS The Health and Retirement Study A nationally-representative longitudinal dataset of older Americans that began in 1992 Ongoing with new cohorts and biennial follow-up interviews Multiple cohorts: HRS Core (51 to 61 in 1992); War Babies (51 to 56 in 1998); Early Boomers (51 to 56 in 2004); Mid-Boomers (51 to 56 in 2010) Methodology for examining retirement transitions Define full-time career (FTC) job = 1,600+ hours/year AND 10+ years of tenure Select respondents who were on a FTC wage-and-salary job at the time of their first interview Examine respondents’ work histories since the first interview

Qualitative Findings Plans to Work in Retirement, by Country Respondents across the three countries differ substantially with respect to their plans for continued work in retirement. Approximately one half (49%) of our sample of U.S. respondents indicated that they planned to work for pay in retirement or were open to working for pay in retirement, and another one quarter (27%) planned to participate in some form on non-paid volunteer activity. In contrast, among our sample of UK respondents, the percentage who planned to work for pay in retirement or who were open to the possibility of working matched the percentage (42%) who had no plans to work or volunteer in retirement. The remaining 15 percent expressed an interest in volunteering only. Among our sample of Italian respondents, the majority (70%) did not plan to work or volunteer in retirement.

Qualitative Findings Plans to Work in Retirement, by Country

Qualitative Findings Concerns about Retirement, by Country Even with the relatively high percentage of US respondents expecting to work in retirement or open to the possibility, the large majority of them expressed general optimism about their retirement, with more than three quarters (76%) having no serious concerns about finances or anxiety about the retirement transition in general. When stratified by work status, however, those who planned to continue working later in life had a relatively higher share of respondents who had financial or other concerns about retirement. On the surface these findings do not support the notion that those who plan to work for pay or who are open to the possibility have a more optimistic view of retirement.

Qualitative Findings Concerns about Retirement, by Plans to Work in Retirement and Country

Perspectives about Work in Retirement Positive Perceptions of Continued Work Work as a Way to Alleviate Anxieties about Retirement

Perspectives about Leisure and Income Security in Retirement Optimism about Full-time Leisure in Retirement Concerns about Income Security in Retirement

Qualitative Findings Well-Being in Retirement, by Plans to Work in Retirement and by Country An analysis of well-being, self-efficacy, and sleep quality revealed that, among the US respondents, those who planned to work for pay in retirement or who were open to the possibility did not have higher outcomes, though they also did not have substantially lower values. This result appears consistent with our findings regarding the prevalence of having financial or other concerns with respect to the retirement transition process. Subsequent analyses of the interviews indicated that work later in life is actually viewed positively for most, both because of the additional income work provides but also because of the nonpecuniary benefits of continued work. The takeaway for the UK appears to be similar to that of the US.

Well-Being Measure from the Qualitative Interviews

Self Efficacy Measure from the Qualitative Interviews

Sleep Quality Measure from the Qualitative Interviews

Qualitative Analysis Self-Efficacy, Well-being, and Sleep Quality by Country

Qualitative Analysis Self-Efficacy, Well-being, and Sleep Quality, by Expected Work in Retirement and Country

Analysis of the HRS Data We use the HRS data to explore the extent to which distinct differences exist between the “definite” work and the “maybe” work groups. Three retirement expectations variables were used to assess the optionality of continued work later in life among the HRS respondents. The first was whether the respondent plans to continue work in retirement (asked in wave 1 only), with response options being “stop work entirely” or “continue paid work.” The second and third expectations variables were the respondent’s self-reported probability of working past age 62 and age 65. The responses ranged from 0 to 100, and were grouped into a three- way variable: 0% (no chance); 1-99% (some chance); and 100% (certainty). Our interpretation of these three groups for the purposes of this paper is that the first group consists of those who will likely not work; the second group consists of those for whom work is an option; and the third group consists of those for whom work is likely required.

Sample Derivation from the Health and Retirement Study: Men

Sample Derivation from the Health and Retirement Study: Women

HRS Analysis Expectations for Working in Retirement, by Gender

HRS Analysis Pre-Retirement Outcomes – Descriptive Analysis We use CESD scores measured just prior to the first transition from career employment to explore the extent to which expectations about continued work in life are associated with a more optimistic view of retirement and overall well-being. We find that those who reported some chance of working beyond age 62 and 65 reported lower CESD scores (i.e., better mental health outcomes) compared with those who reported no possibility of working past age 62 or 65. CESD scores were highest (i.e., lowest mental health outcomes) among those who reported working past 62 or 65 with certainty—an indication that work later in life for this group is likely out of necessity and not a choice.

HRS Analysis Retirement Expectations and Well-Being Prior to Transition, by Anticipated Work Plans in Retirement: Men

HRS Analysis Retirement Expectations and Well-Being Prior to Transition, by Anticipated Work Plans in Retirement: Women

HRS Analysis Post-Retirement Outcomes – Descriptive Analysis Even after the transition is made from career employment, CESD scores remain lower (i.e., better mental health outcomes) among those who reported the option of continued work later in life, though the result is more pronounced among men than women. The most negative outcomes in retirement, measured as changes in CESD scores and with respect to satisfaction with retirement (not at all, moderately, and very), were found among those who reported working past 62 and 65 with certainty. This result provides further evidence that individuals who did not view work later in life as an option or choice, but rather as a necessity, reported the lowest outcomes.

Satisfaction with and Well-Being in Retirement, by Anticipated Work Plans in Retirement, Men

Satisfaction with and Well-Being in Retirement, by Anticipated Work Plans in Retirement, Women

HRS Analysis Retirement Outcomes – Multivariate Analysis A multivariate analysis of CESD scores just prior to transition and post transition from career employment reveals that men who reported that they plan to work beyond age 65 with certainty—arguably those with no choice but to work—had significantly higher CESD scores (i.e., lower mental health outcomes) relative to those with the option of continued work or who had no plans for continued work past age 65. This result holds in both the univariate context and controlling for known determinants of retirement outcomes (i.e., age, health status, spouse’s health status, education, marital status, dependent children, employment status of spouse, home ownership, wage, wealth, occupation, pension status, health insurance status, and region).

Multivariate Analysis of CESD Scores Post Transition, by Gender

Limitations The relationships between the prospect of continued work later in life and individuals’ outlook for their retirement years are associations and not necessarily causal. The qualitative portion of the analyses are not necessarily generalizable to the population as a whole. The metrics used to assess satisfaction with retirement and overall well- being could be expanded with a variety of different measures. The timing of the interviews could limit the extent to which the results can be applied to additional cohorts of retirees. In particular, the qualitative interviews took place in 2014, five years since the official end of the Great Recession in the US.

Conclusion This study set out to examine the relationship between the optionality of work in retirement and individuals’ optimism about their retirement years just prior to leaving career employment. We found partial support for this hypothesis. Those who had work options or who were open to the prospect of continued work later in life were more likely to report a positive outlook for their retirement years relative to those who reported being obligated to work out of financial necessity. Those who view work as an option, however, generally did not experience better outcomes relative to those who planned not to work in retirement or those who planned to volunteer in retirement.