Money isn’t everything—work environments and personality type also influence when older workers retire, find researchers out of the University of South California and the RAND Corporation.
Compensation and financial incentives are just two work-related factors that may affect individual retirement decisions, write Marco Angrisani, Michael D. Hurd, Erik Meijer, Andrew M. Parker, and Susann Rohwedder in “Labor Force Transitions at Older Ages: The Roles of Work Environment and Personality.”
“[J]ob characteristics such as autonomy, skill variety, task significance and difficult, stress and physical demands, peer pressure and relations with coworkers play a crucial role in determining psychological commitment to work at older ages,” they write in a research paper supported by a grant from the Social Security Administration through the University of Michigan’s Retirement Research Center.
Financial preparedness for retirement and health events are typically cited as the main predictors for when an older worker may choose to exit the labor force, but there’s not much research documenting how much work environment and personality influence retirement decisions, the authors note.
“While personality traits do not directly drive labor force transitions, the effect of job characteristics on labor supply outcomes varies with the ‘intensity’ of personality traits,” says the research paper.
Job characteristics are strongly related to personality traits, the paper notes, suggesting that depending on their personality, individuals may select specific jobs whose characteristics ultimately shape their retirement path.
Higher wages can effectively keep more passive, reserved personality types in the labor force. In contrast, monetary incentives are a less important factor for workers who are highly active and engaged to remain employed full-time.
Ultimately, though, while personality is often intertwined with the ability to cope with unpleasant work situations, retirement readiness is generally predicated on financial preparedness.
“The decision to retire involves weighting the utility of leisure against the (dis)utility of working. From this point of view, one would expect workers to retire earlier, the more unpleasant, difficult, and stressful their jobs are,” the researchers say. “The timing of retirement, however, is critically determined by an individual’s financial needs.”
Written by Alyssa Gerace