A Gradual Exit May Not Make for a Happier Retirement

Esteban CalvoKelly Haverstick Steven A. Sass

IB#7-16

Introduction

Workers often say they want to retire gradually.  As retirement is a sharp break with life as they know it, it’s not surprising that many prefer to negotiate the transition a step at a time.  Many policymakers also view gradual retirement favorably.  They see it as a way to extend careers, shorten retirements, and thereby improve retirement income security.  Expanding opportunities for gradual or “phased” retirement has thus gained a prominent place on the policy agenda.

Workers who say they want to retire gradually, however, are clearly not basing their preference on personal experience.  These workers have not retired both ways, concluding that retiring in stages is better.  To shed light on this issue, this brief summarizes a new study comparing individuals who retired gradually with those who retired “cold turkey” and asks which are happier in retirement.  The study uses happiness as the yardstick because it measures realized quality of life; other criteria — such as income, wealth, social status, or health — measure potential quality of life.  Greater happiness in retirement is also what workers seem to expect if they exit the labor force gradually…