Even defined benefit plans are coming under strain today. In addition, retirement income should be planned in reverse without attempting to make forward predictions. Many people believe retirement planning is the act of saving in a k, IRA or Roth. That is how you accumulate retirement resources. In truth, retirement planning is more about how to live on those retirement resources without outliving them. Here is research that explains how to do that without products, but with indexing.
Also note that these papers address the investment portfolio measurement and monitoring aspects.
It becomes a habit. Development of the value of FRP, like saving in general, is in part based on a person's ability to delay gratification for a long term goal or dream. On the other hand, this pattern of continuity is not immutable. At least three types of influences could lead to changes in FPR: normative age-related influences, normative history-related influences, and non-normative life events.
Based on normative age-related influences, workers around 55 years old become more interested in financial planning than younger workers. In Europe, history-related influences could be exemplified by the pension system reform, which increased the population's awareness of the sustainability of future pensions. Finally, non-normative life events, such as major health problems, could interfere with FPR. Elimination of mandatory retirement age in various countries has changed a key benchmark of retirement.
The development of a portfolio of part-time jobs and choosing which jobs need to be financially compensated opens new possibilities to reframe the concept of retirement. With lengthening of the years of quality and active living, people are searching for meaning and purpose beyond subsistence in the latter stages of life. The empirical evidence supporting this model still is fragmentary and insufficient. Despite the fact that there is more than a decade's worth of empirical works that have examined partial aspects of the model e.
The evolution of one's life can be interpreted through the intentionality shown about adaptation, learning, and change. In this theory and the longitudinal research over the last 50 years about it and its components, explains that the first key discovery on the path to sustained, desired change is articulating a personal vision, or dream. This is not a set of goals, but something bigger and with a longer term framework. Other key elements in ICT are the resonant, trusting relationships that enable a person to explore and refresh in an iterative manner their dream and progress toward it.
Despite the fact that Hershey's model provides responses to a wide range of present questions about FPR, various untouched topics offer opportunities for moving forward in this domain.
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We will briefly discuss them, following the dimensions of the model. Related to capacity, additional variables should be considered See Figure 1. First, the Need for Cognitive Closure refers to the individual's desire to obtain clear and definitive responses to a problem Webster and Kruglanski, Empirical research reports significant differences between people with high and low need for cognitive closure regarding the quantity of information they process, the intensity of that information, the use of decision rules, and the level of self-confidence in their decisions.
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Accordingly, people with a high Need for Cognitive Closure are more likely to focus on information that is easy to process, reject complex or incomplete information, decide faster, have an urgent desire to achieve closure and retain it permanently. Its influence has been shown in a broad array of decision-making processes Dolinski et al. Due to the complexity and uncertainty entailed by FPR, as it implies the processing of complex information and the anticipation of needs with a high degree of uncertainty, we contend that Need for Cognitive Closure offers an interesting avenue to develop Hershey's model, as some empirical study has proposed Topa et al.
Figure 1. Expanded Model for FPR. Secondly, FPR is a complex task that is often accompanied by worries. Thus, metacognition refers to beliefs about one's own cognitive system, the influences that affect it, attention and evaluation of the meaning of one's thoughts Wells and Cartwright-Hatton, Due to the complexity of FPR and the worries associated with it, exploring the role of metacognitions is promising, as a recent empirical study showed Kiso and Hershey, In particular, positive and negative beliefs about one's own worries, as well as cognitive trust and the self-attention, could play important roles in the relationships between capacity to plan and FPR.
There is empirical evidence that supports the joint influence of metacognitions and worry in the development of anxiety in other contexts Ryum et al. The findings would help to understand why people consider it important to plan but do not carry out specific behaviors of saving and financial management. As it relates to capacity, the development of one's retirement identity and financial self-efficacy is important in FPR. For past generations, FPR primarily focused on evaluating the adequacy of an individual's income and cash flow sources over a 5—10 year retirement lifespan.
Improvements in lifestyle and medical technology have increased life expectancy and provided a 20—30 year increase in human longevity. In a related vein, Donaldson and colleagues showed that a higher personal sense of mastery, a variable near to self-efficacy, significantly mediated the relationships between pre-retirement planning and adjustment Donaldson et al. FPR now requires careful evaluations and planning around an individual's future social emotional as well as economic needs. Although workers may be old enough to fully retire in their 60's, they may not be ready to fully disengage from the workforce.
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For many, work provides value above and beyond economic gain. Such value includes a regular set of activities that provide time structure, status, identity, a sense of participation in a collective effort, and the opportunity to socialize with co-workers Price et al. One's ability to form a view of their ideal self in retirement is a beneficial part of the retirement planning process Lunceford, Ideal self begins as a personal vision, or an image of what kind of person someone wishes to be Boyatzis and Akrivou, In the context of retirement, ideal self can be what a person would like to accomplish after they choose to physically or psychologically reduce their commitment to their primary career.
This may take the form of paid work or volunteer work on a part-time or full-time basis; it may include work in the same profession, development of a new skillset or vocation, or complete exit from the workforce to a life of leisure. Ideal self is the driver of intentional change in one's behavior, emotions, perceptions, and attitudes Boyatzis and Akrivou, It must also be an image of the kind of person they want to be in their later years.
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The Ideal Self involves a sense of hope about the future. Hope becomes an emotional tone for the future, instead of regret for a life not lived, fear of diminishing resources, or fear of death and the end game of life. The development of the ideal self in the retirement planning process puts an image of the desired future at the center of the FRP, not merely financial analysis.
It may be instrumental in addressing stress related to the alteration of career identity and finances in retirement. The formation of ideal self has a relationship to understanding an individual's intent to engage in bridge work Lunceford, In addition, it positively influences well-being in the pre-retirement process Lunceford, Measurement of the ideal self may be done with recent evaluation tools developed by Boyatzis et al.
The development of financial self-efficacy is also critical in the FPR process. Financial self-efficacy is a belief that one can be successful financially in certain situations. Self-efficacy is related to self-confidence, motivation, optimism, and the belief that one can cope with a variety of life's challenges Bandura, People with high levels of self-efficacy believe they can perform well at specified tasks Lown, In recent pre-retirement studies, financial self-efficacy was show to have a positive influence on career decision making, the formation of retirement confidence and well-being Lunceford, They believe a desired future is somewhat in their control.
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In a related vein, the individual experience of aging could influence retirement planning in general and, specifically, FPR. As Heraty and McCarthy suggested, self-perceptions of aging could influence FPR among older workers, and also post-retirement employment options Fasbender et al.
Related to willingness, various affective aspects and personality traits expand future research, based on complex relationships between emotions and decision-making Hariharan et al. On the one hand, we should not forget that retirement marks the end of obligatory work and serves as a reminder of aging, failing health and, eventually, death. Unsurprisingly, then retirement can provoke unease, gloom and dread, and would be associated with fear of death, complex emotional phenomenon, which include apprehension both for oneself and for loved ones.
A growing body of empirical evidence shows that fear of death impinges on most spheres of life, and specifically on financial decisions.
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Despite this fact, only recent studies begin to consider the role of fear of death in explaining FPR Topa et al. Specifically, this study showed that fear of death acts as a moderator in the relationship between financial goals and retirement savings adequacy, mediated by financial behavior among clients of financial advisory firms. These results thus represent one step forward in the investigation of the influence of fear of death on people with strong anti-consumer attitudes, which are more likely to exercise tight control over their finances.
Related to the job attitudes-FPR relationships, previous studies indicate that retirement planning in general has negatively been predicted by job satisfaction and work involvement Topa et al. As retirement is a crucial event in the life trajectory, work-related factors would be very relevant as antecedents of quitting one's job. On the one hand are positive attitudes toward the job, as strong engagement and high satisfaction would act as pull factors, influencing the individual decision to delay FPR i. On the other, some studies note that work dissatisfaction influenced the decision to exit the organization but not the labor market, so there would no direct effect on FPR Perera et al.
On the other hand, personal character traits also could influence FPR, even though little empirical research exists in this area Rahimi et al.
Procrastination consists of deliberately putting off or delaying an action which the subject nevertheless intends to take, especially where delay is likely to have adverse effects. This personality trait would affect FPR and outcomes, specifically due to the fact that many retirement-related goals are linked to a specific time horizon.
This means that retirement goals seem to be imposed by the passage of the time and may have a specific time frame. Initial evidence in this direction has been recently provided by Topa and Herrador-Alcaide , but only limited to a sample of workers between ages 45 and 63 employed by small- and medium-sized firms in Spain.
Some present findings have been summarized in Table 1. Table 1. Summary of recent studies with further extensions of the Hershey's Model. Additionally, emotional intelligence has been widely researched over the past years due to its moderator role on the relationships between contextual antecedents and desirable personal outcomes.
While the first conceptualization of emotional intelligence included appraisal and regulation of emotions, recent research has examined its incremental contribution, beyond personality features' contribution, to different indices of adaptation. As future planning and decision-making should be conceptualized as and adaptive process, also including a specific financial component, people who possess greater abilities in understanding and controlling their emotions could be also better in managing their FPR. Concerning the opportunity dimension, a great amount of studies have relied on social support Topa et al.
First, a healthy organization that provides older workers with motivational task design and generates an environment where successful aging is possible could positively influence not only employees' pre-retirement well-being Guglielmi et al. In a very basic sense, due to the fact that stress is resource consuming, healthier organizations seem to encourage their members to concentrate their efforts on future planning. Despite this promissory avenue, at present, no empirical research on these relationships was found. Second, aging stereotypes widely spread both in organizational and in societal environments could undermine FPR.
Despite the fact that direct relationships are difficult to conceive, links between negative stereotypes and FPR should be explored both through their negative effects on retirement self-efficacy Valero and Topa, —which includes a financial dimension—or through their undermining future career prospects for older workers Lytle et al. Moreover, while it would be expected that FPR would significantly increase among older workers, different exit pathways could be observed. Hence, the specific role of career transitions and bridge employment on FPR also deserves further exploration, as recent revision stated Earl et al.
Few studies examine factors, especially non-financial, that lead to the intent to work in retirement Kerr and Armstrong-Stassen, whether for pay or not, full time or part time or a portfolio of part time jobs. The recent study published by Cahill and colleagues with a large national-representative sample of older Americans, showed that bridge employment seems to be driven by other reasons than financial insecurity, both for those with little or medium financial assets. But, the same study found that those with less wealth seem to be more oriented to full time and wage and salary employment Cahill et al.
Additional studies could be beneficial to workers and employees.
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