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Happiness Is A Reliable Retirement
By Joel Dresang, Journal Sentinal
November 11, 2005
Retirees don't care too much for money - money can't buy them certainty, says a University of Wisconsin-Milwaukee economist who is becoming a national authority on happy retirements.
Sure, fund size matters to pensioners, Keith Bender told the Wisconsin Chapter of the Labor Employment Relations Association on Friday. But his research suggests that the type of pension makes a difference, too.
According to Bender, all else being equal, retirees are more likely to consider their retirements "very satisfying" if they have defined benefit pensions that set how much money they receive each month rather than if they have defined contribution plans, such as 401(k)s, where payouts are based on investment outcomes.
In fact, Bender figures it would take about $35,000 in extra retirement income to make a retiree with a 401(k) as happy as one with a defined benefit plan.
Bender's research is based on work he has done with the Center for Retirement Research at Boston College using a nationally representative survey of Americans ages 59 to 69 in 2000.
The findings on retirees, in a nutshell: "They like money, but they dislike risk," Bender told the union-management group after lunch of tenderloin tips and salmon with dill sauce at Alioto's restaurant.
The trend has been to shift the risk for retirement income away from employers and toward workers.
Bender said the number of American workers participating in defined contribution plans rose nearly 70% to more than 60 million between 1988 and 2000 while the number in defined contribution pensions stayed even at about 41 million.
Fueling that trend is talk of expanding investments options for Social Security savings and growing concern over corporate defaults on traditional pension obligations.
"The forgotten group in all these discussions is the retirees themselves," Bender said.
The survey findings suggest retirees are averse to the risk inherent in 401(k)-type saving plans and prefer to count on traditional pension benefits.
"That exposure to risk - holding the dollars constant - decreases retirees' well-being," said Bender, formerly an economist for the Social Security Administration, in Washington, D.C. "Retirees care not only about the dollars from their pension but also the type of pension that they have, and I'm interpreting that as exposure to risk."
Bender found other variables in retirement well-being. Among them:
. Men are less likely to be very satisfied with their retirements than women.
. Married retirees are happier than singles.
. Older retirees are more content than younger ones.
. Satisfaction rises with the survey respondent's health.
. Those who consider themselves retired but still work are more satisfied.
One of the most significant determining factors in retirement happiness, Bender said, is whether retirement was forced upon a worker.
"This effect persists over time," Bender said. "Even after 10 years, there's still a significant difference between those people forced to retire and those who voluntarily retired."
According to Bender's research, those forced to retire were about 30% less likely to be very satisfied with their retirement than those who parted on their own terms, all other variables held equal.
Those who said they retired in part because they wanted to and partly because they were forced to were 20% less likely to be happy retirees.
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