Reinventing Retirement
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REVIEW
Reinventing Retirement Deanna L. Sharpe1
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract Longer lifespans, shift to self-funded retirement, market volatility, and lifestyle changes have reshaped retirement into a significant life stage that requires thoughtful long-term planning and diligent preparation. This decade review of 15 research papers published in the Journal of Family and Economic Issues between 2010 and 2019 assesses what has been learned regarding consumer context, choice, and behavior during retirement preparation, retirement transition, and retirement living. The significant need for research-based education throughout the retirement planning process was a consistent theme. Directions for future research are explored. Keywords Retirement education · Retirement planning · Women’s retirement
Introduction Convergence of several demographic, political, economic, and social trends has reshaped retirement into a significant life stage that now requires thoughtful planning and diligent preparation over a substantial portion of the life cycle. Projected life expectancy at age 65 in the United States is now 83 for men and 86 for women, an average of 5.5 years longer than it was in 1950 (CDC 2018). Some individuals may live even longer. About a fourth of those currently age 65 will live past age 90; 3% of men and 6% of women can expect to live to 100 (APA 2020; Munnell 2017). Consequently, prudent retirement planning now means ensuring that retirement resources last several decades. Significant change has occurred in tax-advantaged retirement plan investment options allowed under Federal law. In 1970, pension plans covered 45% of private sector workers in the United States (Tehrani 2016). Employers were responsible for plan funding. Plan terms determined worker retirement income, usually by applying a formula to final salary and years of service. In 1974, the Employee This is one of several papers published together in Journal of Family and Economic Issues on the “Special Issue on Virtual Decade in Review”. * Deanna L. Sharpe [email protected] 1
Personal Financial Planning Department, University of Missouri, 239 Stanley Hall, Columbia, MO, USA
Retirement Income Security Act (ERISA) created the Individual Retirement Account (IRA). Initially, only workers lacking an employer-based pension plan could participate. Annual tax-deductible contributions were capped at $1500, with account growth tax-deferred until withdrawal at retirement. Numerous subsequent tax law changes have altered IRA contribution limits and expanded participation to all workers, their non-working spouses, and small business owners. In 1997, a newly created Roth IRA allowed nondeductible contributions that under certain circumstances could be withdrawn with no tax penalty. “Catch-up” plan contributions for those aged 50 and older were introduced in 2001 (Grill 2020). Responsibility for retirement fund adequacy began decidedly shifting to workers after the 1978 Revenue Act established the qualifi
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