Ajzen’s (1991) theory of planned behaviour (TPB) has been used in numerous studies to determine what encourages or discourages the performance of a behaviour, such as planning for retirement. This study will consider the retirement intentions of individuals (as an aspect of retirement planning) and how retirement intentions can influence the retirement funding adequacy of individuals. This section will define “retirement intentions”, and discuss the determinants of individuals’ retirement intentions. Previous research on retirement intentions will also be discussed in this section.
5.2.3.1 Defining retirement intentions
“Intention” refers to the willingness and extent of an individual’s efforts to perform a voluntary behaviour (Ajzen 1991). Subjective norms and the perceived behavioural control of performing the behaviour form part of an individual’s attitude. An individual’s attitude can thus determine that individual’s intention to perform a behaviour. (Kautonen et al. 2013; Solesvik 2013; Gelderen, Brand, Van Praag, Bodewes, Poutsma & Van Gils 2008). Zaniboni et al. (2010:273) state that retirement intentions can be defined as the plans an individual makes to retire completely.
5.2.3.2 The determinants of retirement intentions
The process of retirement can be divided into the following stages: intentions to retire, decision to retire, and actual retirement (Harkonmaki, Martikainen, Lahelma, Pitkaniemi, Halmeenmaki, Silventoinen & Rahkonen 2009:253). Therefore, “retirement intentions” can also refer to the decision an individual makes about retiring either early or retiring later on in their lives (Knoll 2011:16; Von Bonsdorff 2009:23). In essence, intentions to retire early can be assessed by determining whether individuals have considered retiring before normal retirement age (Harkonmaki et al. 2009:253). Therefore, individuals’ retirement intentions can also be viewed in terms of their intentions to retire early or to delay retirement. The literature has shown that there are many determinants of retirement intentions, among them an individual’s work.
(a) Work as a determinant of delayed retirement intentions
Individuals’ autonomy at work, their attachment to work, and their interpersonal relationships at work can also affect their intention to continue paid work or to delay retirement. Another factor that can influence the intention to delay retirement and to continue working is the importance of working to the individual. (Shacklock & Brunetto 2011:260). Wong and Earl (2009:3) define this as “work centrality”, which is the extent to which the work of an individual is of key importance compared with all other life roles. Work centrality provides an indication of an individual’s commitment to his/her work (Schmidt & Lee 2008:299). Individuals with higher work centrality are more committed to their work roles, and they can experience greater difficulty adjusting to retirement than those with lower work centrality (Wong & Earl 2009:3). Linking with
work centrality,Kostek (2012:9)proposes that working longer hours signal a stronger commitment to work due to a preference for work. Individuals who work longer hours are thus likely to retire later (Denaeghel et al. 2011:116). Withdrawal from work through retirement is less likely among individuals who are highly motivated by intrinsic or extrinsic aspects of work. As such, individuals who enjoy their work and derive motivation from it will be less inclined to retire (Münderlein, Ybema & Koster 2013:7). Individuals who enjoy their work can feel responsible for the work they do, and thus remain in the workforce for longer than required.
(b) A self-directed career as a determinant of delayed retirement
A self-directed career attitude implies that individuals feel responsible for their own careers and have stronger beliefs about creating opportunities for themselves. Creating these opportunities is something that individuals with self-directed career attitudes are likely to do, as a self-directed career attitude also relates to an orientation towards their own professional development. (Pitt-Catsouphes & Matz-Costa 2008:218). Individuals who possess self-directed career attitudes have an additional reason to delay the retirement decision, as it will prevent skill-obsolescence (De Vos & Segers 2013:160). Therefore, those individuals who have self-directed careers attitude will engage in career self-management behaviours, which in turn will lead to late retirement intentions, as those who have self-directed career attitudes might not want to retire as they have put a lot of effort into the development of their skills and careers (De Vos & Segers 2013:159). Consequently, the fact that individuals put effort into developing their careers also indicates their engagement in their work.
(c) Employee engagement as a determinant of delayed retirement
According to Pitt-Catsouphes and Matz-Costa (2008:216), employee engagement is conceived as a state where employees find meaning in their work and devote discretionary effort and time towards their work. Employee engagement goes beyond employee satisfaction or commitment: it is an enhanced state of thinking and acting that brings about personal fulfilment for individuals from their work (Schaufeli, Salanova, González-Romá & Bakker 2002:74). De Vos and Segers (2013:160) state that engaged employees have late retirement intentions. This is possible, as engaged
employees derive meaning and purpose from their work, and so prefer to remain employed for as long as possible.
(d) Social interactions as a determinant of delayed retirement
Van Dam et al. (2009:272) state that the social environment outside the workplace has been identified as a factor influencing retirement decision-making, and that the social environment at work can affect retirement intentions. Through individuals’ work, social interaction occurs, as work provides contact with colleagues and associates that can evolve into long-term social relationships. Working also provides individuals with a sense of routine and engagement. As a result, there is a sense of purpose, and a sense that individuals are contributing to something that is worthwhile. (Cameron 2005:12-13). Thus, good relations with other individuals such as colleagues, and the overall satisfaction with one’s life, can decrease the intentions to retire early (Harkonmaki et al. 2009:253).
(e) Work as a determinant of early retirement
Although work can encourage individuals to delay retirement, work can also dictate whether individuals retire early (Henkens & Leenders 2010:307; Zappalà et al. 2008:155). “Burnout” refers to a syndrome of emotional exhaustion, cynicism, a sense of ineffectiveness, or a lack of accomplishment that individuals experience (Henkens & Leenders 2010:307; Maslach & Jackson 1981). Henkens and Leenders (2010:307) state that burnout results in reduced productivity, higher absenteeism, and an intention to quit one’s job. Symptoms of burnout occur when the job demands are high and the job resources are limited. “Job demands” refer to the physical, social, and organisational aspects of a job that require constant physical and mental effort, and are therefore associated with psychological exhaustion (Henkens & Leenders 2010:308-309). As a result, the more physically demanding a job may be, the higher the workload, the greater the likelihood of burnout occurring (Henkens & Leenders 2010:309). An individual who experiences burnout is likely to retire earlier than an individual who does not. Therefore, work can shape the decisions of individuals about whether to continue working or to retire (Zappalà et al. 2008:155; Barnes & Taylor 2006:9; Public Employment Office NSW Premier’s Department 2006:39; Beehr et al. 2000:212; Taylor & Shore 1995:76).
(f) Job displacement and ill health as determinants of early retirement
Szinovacz and DeViney (2000:473) state that there are two conditions that can lead to non-voluntary retirement: job displacement and ill health. Job displacement is defined as involuntary job loss due to economic factors such as economic downturns or structural change that are largely beyond the control of individual workers (Brand 2004:1). Cameron (2005:17) argues that, in certain cases, early retirement is not individuals’ voluntary decision, such as when they are forced into early retirement by their employers. Some employers might feel threatened by the experience and knowledge of an older employee. A misconception about older individuals is that, when they are closer to retirement age, they no longer want to work full-time and would prefer to retire completely. As a consequence of the age of individuals who are close to retirement, a substantial number leave the workforce early – either by choice, or through redundancy and early retirement options.
Health has also been identified as an important determinant of retirement intentions
(Public Employment Office NSW Premier’s Department 2006:40; Beehr et al. 2000:211). However, creating and sustaining a healthy workforce does not necessarily guarantee that older employees will continue working until their official retirement age. (Schreurs, Van Emmerik, De Cuyper, Notelaers & De Witte 2010
:
63).(g) Psycho-social factors as determinants of early retirement
Another factor influencing retirement intentions is the value of work to individuals, and their desire to continue to make a contribution to the community and the workplace. “Value” is referred to as an incentive for individuals to remain in employment. The absence of value can be viewed as a disincentive that could lead to early retirement. The impact of divorce plays a vital role in the value individuals perceive about their workplace. In this regard, the importance of work contributes to the self-esteem of individuals as a result of their changed personal circumstances due to divorce. (Public Employment Office NSW Premier’s Department 2006:40). Such individuals might opt to retire later, as they may have grown more attached to their work. Therefore, psycho- social factors such as the attitude of individuals towards work, development opportunities from their work, and anticipation of lost social integration upon retirement are all related to the retirement intentions of individuals. (Zaniboni et al. 2010:271).
(h) Family responsibility as a determinant of retirement intentions
The influence of family is a crucial factor in determining when to retire; and this impact is not only financial. Some individuals are guided in their decision-making by the needs, health, and retirement decisions of partners or spouses (Beehr et al. 2000:211). The retirement intentions of individuals can also be determined by whether they care for ill partners/spouses, or have children with disabilities, or are caring for aged parents (Public Employment Office NSW Premier’s Department 2006:40). The retirement intentions of individuals can also be influenced by whether they have children who have not yet completed their tertiary education (Public Employment Office NSW Premier’s Department 2006:40). This also ties in with the strong desire to see their children established in their lives and/or careers before they themselves retire. Individuals in such situations can be presented with a significant challenge in balancing the needs of family members with their own work and retirement plans. (Public Employment Office NSW Premier’s Department 2006:40).
(i) Finances as a determinant of retirement intentions
Ng et al. (2011:197) explain that retirement intentions are established, because the savings that are made in the early life-cycle of individuals become the financial resources to be used for later retirement years. Individuals who anticipate retiring, especially if it is in the near future, are more likely to be making financial preparations to make retirement possible (Old Mutual Retirement Monitor 2011b:17; Dan 2004:92; Mutran et al. 1997:252). Li et al. (1996:39) state that the financial resources of individuals can determine their intention to remain employed, or their intention to retire.
5.2.3.3 Previous research on retirement intentions
In considering the intentions of individuals to retire early, control perceptions are important. Control perceptions are determined by beliefs about the likelihood that certain factors will inhibit or facilitate a behaviour, and the power of these factors to do so (Ajzen 1991). In other words, the perception that individuals are in control or have some degree of control over a behaviour will influence their intentions to engage in the behaviour. Concerning retirement, it is possible that some individuals believe that they are not fully in the position to decide whether and when to leave their professional
careers (Van Dam et al. 2009:272-273). Van Dam et al. (2009:281) argue that individuals who have more positive attitudes toward early retirement, and who feel that they have control over the early retirement decision, have stronger intentions to retire early. However, previous research has shown that individuals who have negative attitudes towards retirement fear social isolation during retirement and would prefer late retirement, whilst individuals involved in the planning activities for their retirement are less likely to be lured into late retirement (Zappalà et al. 2008:156). Therefore, the actual work of individuals can determine whether individuals postpone retirement.
There are various motivators behind decisions of individuals to retire or to remain in employment. In line with the literature discussed, previous studies have shown that these motivators can influence the intentions of individuals to retire. Among them are work-related aspects such as job satisfaction, supportive management, job stress, intrinsic work aspects, extrinsic work aspects, restructure/organisational change, and interpersonal work relationships. Other work-related motivators include attitudes towards the job, organisational commitment, symptoms of burnout, employee autonomy, the feeling of individuals that their work is valued, boredom at work, or a lack of interesting work (Zappalà et al. 2008:155; Public Employment Office NSW Premier’s Department 2006:39). Wong and Earl (2009:3) state that many individuals do not have personal choices in the decisions to retire. Retirement is often the result of the organisation requiring an individual to retire; or retirement occurs because of extenuating personal circumstances (Beehr et al. 2000:210; Szinovacz & DeViney, 2000:475; Taylor & Shore 1995:78). These work-related aspects, or a lack of them, can influence the retirement intentions of individuals. Jobs requiring great physical effort or repetitive tasks that make employees tired of working might induce them to retire early (Beehr et al. 2000:212). Kautonen et al. (2012:425) argue that individuals’ satisfaction with their jobs is an important determinant of their intentions to postpone their retirement. Other studies have observed the impact of organisational commitment on retirement decision-making (Zappalà et al. 2008:155; Taylor & Shore 1995:76). Individuals who are committed to their work might opt to continue to work instead of retiring. In contrast, individuals who have low levels of work commitment might have different retirement intentions.
5.2.3.4 The retirement intentions of retirement planners versus non-retirement planners
Those who plan for their retirement have different retirement intentions than those who do not plan for their retirement. For instance, in the South African context, a study conducted by Old Mutual Retirement Monitor (2011b:22) revealed that most South Africans (48%) intend to work for formal pay at retirement for financial reasons, as working will be financially necessary for their survival post-retirement. Those who plan to continue working will do so to supplement their retirement income so that they can afford extra necessities that might occur. (Old Mutual Retirement Monitor 2011b:22).
Research on an individual’s determinants of retirement decisions consistently asserts that finances are amongst the strongest predictors of decisions to retire (Denaeghel et al. 2011:116; Beehr et al. 2000:207-208; Szinovacz & DeViney, 2000:473; Taylor & Shore 1995:76). Among the main factors that influence employees’ decisions to retire include financial security, because many individuals are not confident that they will be able to retire when they would like to, primarily due to insufficient retirement funds (Department of the Premier and Cabinet 2006:28; Public Employment Office NSW Premier’s Department 2006:11). Decisions to leave the labour force rest to a large extent on whether the post-retirement income of individuals is considered to be sufficient for the individuals’ financial needs. Post-retirement income derives from the retirement benefits and assets, and from a spouse’s earnings if he or she continues to work outside the home. (Szinovacz & DeViney 2000:473). Along with health, financial matters are the main motivator behind when to retire or how long to keep working
(Public Employment Office NSW Premier’s Department 2006:40), as individuals who opt to retire early miss the opportunity to earn additional income to increase their retirement savings. In contrast, it is possible that individuals delay retirement because they have insufficient accumulated retirement savings (Kock & Yoong 2011:865; Montalto 2001:18). Since financial matters are considered to be one of the main drivers of retirement intentions, the retirement intentions of individuals can also be related to their retirement funding adequacy.
Given the above discussions on retirement provisions, retirement attitudes, and retirement intentions of individuals, the next section will provide an in-depth discussion
of the retirement funding adequacy of individuals and the various measures of retirement funding adequacy.