The amount of time workers take when considering retiring and executing the decision to leave a company is typically quite short, according to the results of a new survey released by the Employee Benefit Research Institute.
The survey's findings indicated that 44% of recent retirees took a year or less to retire once they began contemplating a move, with 22% taking six months and 22% taking a year. Twenty-eight percent began thinking about retirement two years in advance, with 28% taking more than two years to decide, according to the results from Washington-based EBRI's study.
The survey canvassed 4,981 people between 55 and 65 who retired from aerospace or defense industry companies in 2003 or later.
The poll included 3,321 engineering/technical-services retirees, with 79% men and 83% married at the time they retired.
Those most likely to have taken at least five years to make a retirement decision were those who stopped working before 58 (25%). Sixteen percent of recent retirees 59 and older who were surveyed took at least five years to make a retirement decision.
DB PLANS A FACTOR
Even though the survey showed that 44% took a year or less to make a retirement decision, those numbers are expected to fall in the coming years as fewer companies offer defined benefit plans, EBRI research associate Craig Copeland said.
Many of the quick retirement decisions being made relate to reaching the age to become pension-eligible, but those employee benefits are becoming less common as more companies transfer from a DB model to a defined contribution plan, he said.
The aerospace and defense industry has more DB plans than other sectors, which likely contributed to the high number of people not taking long to execute a decision to stop working, Mr. Copeland said.
"Most of them made the decision because they qualified for their pension plan," he said. "They had the freedom to make a quick decision."
Many financial advisers, such as Henry Montag of ARS Financial Services Inc., urge clients to have the concept of retirement in their mind long in advance of making a decision, which he admits can be a challenge because most focus on immediate concerns rather than the future.
He recommends that clients put away 10% of earnings throughout their working career so that they will have saved enough to be able to make a sound retirement decision.
"[Saving 10% of earnings] gives them the luxury to have some assets at their disposal," said Mr. Montag, whose Jericho, N.Y.-based firm has $700 million in assets under management. "If that person develops a habit of saving, they will do that throughout their life."
Before exiting a company, the amount of time that is appropriate for someone to consider retiring can vary depending on each individual's financial situation, according to Richard Robb, a managing partner in Capital Management Partners LLC. Although he urges all clients to
use a retirement calculator to determine an estimated retirement date, he finds that many don't seriously consider the issue until their mid-50s.
"[The time taken to consider retirement] should be a matter of their goals, their objectives and their resources," said Mr. Robb, whose Peabody, Mass.-based firm oversees more than $100 million in assets. "There is nothing that is terribly consistent."
Historically, the age at which people zero in on retirement plans has been about 55, but with health care costs rising and people living longer, that decision is now often not on the radar until 62 or even 65, Mr. Copeland said.
"When people reach certain ages, the decision to retire comes very quickly," he said. "Some of these trigger ages are moving."
Even though many clients of financial adviser Marc Austin at Private
Capital Group LLC are wealthy, he still urges them to postpone retirement until they are certain to have the resources to have the lifestyle they desire without working. He stresses to them that they should start mapping out retirement plans many years before it comes time to make the decision so that every factor can be taken into consideration.
"Be realistic [about] what you can really live on," said Mr. Austin, whose West Hartford, Conn.-based firm has more than $350 million in assets under management. "You don't want to run out of money."
E-mail Andrew Coen at [email protected].
