How Different Generations Define Retirement

Like "hipster," "retirement" is a term we can easily recognize yet have a hard time defining. Even researchers who have dedicated their careers to studying retirement have been unable to reach a unified definition.

There’s the conventional way to define retirement: an objective age at which one can exit the workforce, begin collecting Social Security benefits, and have the ability to access retirement savings without penalties.

But on the other hand, research has shown the psychology behind retirement to be much more complex. In their review of the literature, Wang and Shi identified three general perspectives on retirement:

1. A decision-making process grounded in a number of internal and external factors such as financial health or social pressure.
2. An adjustment. This perspective focuses on the transition to retirement itself. Indeed, how and when we retire plays an important role on our retirement experience as a whole, beyond the simple decision to retire. After all, life is filled with uncertainties—we can't foresee what the future holds.
3. Another stage in your professional development that offers opportunities for further growth and potentially new career interests.

But what’s the meaning of retirement on a personal level? Just like for scientists, this analysis demonstrated that the answer can vary.

The Meaning of Retirement in the Cloud

In two separate studies, I asked people to write down the first three words that came to their mind when they thought about “retirement.” This was a quick exercise to see the themes that people associate most with retirement. I then used these responses to construct word clouds that allow us to “peer” into others’ minds and explore what retirement means to them. This piece is by no means a rigorous scientific investigation, but it is an interesting demonstration of just how diverse the meaning of the term “retirement” is.

These word clouds incorporate data from two studies: The first data set was from a large-scale investigation of young adults’ (ages 18 to 25) financial attitudes and behaviors; the second set of participants were 162 persons age 50 and over, taken from two larger convenience samples of American adults (participants produced 1,680 words across the three samples). These two age ranges allow us to make some comparisons about how younger and older adults view retirement. For clarity, I ensured that the words were spelled correctly and grouped common terms under the same label (for example: “relax” consisted of words such as “relax” and “relaxation”).

How the Younger Generations Define Retirement

The image below shows what was on the mind of young adults when they thought about “retirement.”

Notice the word at the epicenter of the cloud has nothing to do with retirement itself—the focus is on the age! It seems that for the young adults in this sample, the concept of retirement evokes the aging process first and relaxation second. Other positive aspects such as freedom, travel, and vacations are also present.

Interestingly, a few negative aspects of retirement appeared in the minds of young adults, a bit further from the cloud’s center: Some are scared while others irk at the prospect of boredom after leaving the workforce. And of course, finances were in the equation, with money and saving making an appearance in the cloud.

What Does Retirement Mean to Generation Z?

The contents of this word cloud reflect some findings from a recent qualitative study on young adults' perceptions of retirement. The researchers found that young adults have similarly mixed feelings about retirement, with the inevitable aging being at the epicenter of their negative reaction.

How the Younger at Heart Define Retirement

Let’s take a look at words that came to mind for adults ages 50 and older, which you can find in the image below. The most noticeable change is the spotlight—or what is no longer in it. Although age makes an appearance, it is now smaller and off to the side, reflecting that it is no longer as much on people’s minds.

Rather, the epicenter of retirement is now pleasure and pursuit of happiness: travel, relaxation, freedom, family, and, for a few, the beach.

What Does Retirement Mean to 50-Plus Adults?

I also went a step further by looking specifically at what the individuals aged 60 and over in our sample think about when they ponder on “retirement.” The sample is quite small (only 68 participants from the study), but it provides a starting point for understanding those who are just at the cusp of or have already reached the age of retirement.

As shown in the image below, we see once again that age is not at the epicenter of retirement. Rather, we again focus on the finer things in life: vacations, travel, relaxation, and happiness. Some negatives still appear, but they are generally isolated to the outermost regions of the cloud, indicating that they are on the minds of older adults to a lesser extent than of their younger counterparts.

What Does Retirement Mean to 60-Plus Adults?

Lessons Learned About the Meaning of Retirement

This fun little analysis hints at a few nuggets of wisdom.

Perhaps the biggest lesson is that retirement means different things to different people. There is no one-size-fits-all definition of retirement (not even among the those who study it). For advisors, this means that it is important to continuously monitor the way your clients view their own “retirement.”

As we know, the goals we set, including our retirement aspirations, can be subject to change. If your client changed their vision of "retirement," their goals for this journey likely shifted as well. In turn, continuously revisiting and updating the strategy you set with your client to successfully enjoy retirement could benefit them in meeting their goals.

Additionally, retirement’s definition may shift as generations turn over: Consider that “boredom” made an appearance largely among the young crowd but was absent when I analyzed an older sample. This mirrors a finding from my previous research on young adults’ finances: Compared with generations prior, Generation Z appears to be the most apt to continuing working after retirement. Importantly, people old and young alike are excited to retire.

Any negatives aside, most everyone appears to feel positively about the freedom that retirement affords to them. Perhaps for those who are prone to boredom, retirement can provide an exciting opportunity to pursue a new passion; for those who just want to relax, retirement offers ample time to lie around in the hammock. Either way, retirement is cloud nine in the eyes of most people.