Retirement More of a "Downshifting" Than Sudden End to Working

January 18, 2007 ( - A new Vanguard Group study supports the notion that retirement these days for many Americans is not a matter of suddenly exchanging employment for a quiet life of leisure.

A Vanguard news release about the research and survey conducted by its Vanguard Center for Retirement Research said a majority of Americans age 40-69 expected employment would be a big part of their early retirement years.

That is why many have or plan to “downshift” where they move from a traditional full-time position to less-stressful or part-time employment. Nearly two in three respondents age 55-69 have downshifted already or plan to do so in the future, according to the research.

“The widely held belief is that the transition from work to retirement is a sudden, even abrupt, event, with individuals shifting to a care-free life of travel and recreation,” said Steve Utkus, Principal,Vanguard Center for Retirement Research. “Our study reveals that the transition is much more gradual, as many Americans participate in some type of work in their early retirement years.”

According to the announcement, Americans choices about work in their later years are driven largely by financial resources, including assets in employer plans and personal savings, but also by issues such as health and personal preferences.

“As the first members of the baby boom generation reach age 60, there is a growing interest in retirement as a period of relaxation, enjoyment, and reinvention,” Vanguard researchers wrote in their report. “Yet with longer life expectancies and with a desire for a better standard of living in retirement than their parents, there is also a dawning recognition that retirement, especially in the early years, will not be a period of full-time leisure – but a time of leisure and, for many, work.”

Based on the work histories of older Americans, Vanguard found that six distinct paths emerged as individuals transitioned from work to retirement with three-quarters of older Americans on one of the three main paths:

  • The largest group of respondents (35%) left full-time work in their 60s, yet continued with some type of self-employment or part-time job thereafter. Financial necessity was cited as an important reason for continuing to work.
  • Nearly 30% of the survey respondents left the full-time workforce in their 50s and did not work again. This group fit the conventional view of retirement, but retired much earlier than is typical. Adequate financial resources, in pensions, 401(k)s, and personal savings accounts, were key in making this transition.
  • Some 12% of respondents retired from full-time work in their 50s, but quickly took on high levels of part-time work or self-employment. Generally, this group of semi-retirees resumed working to enjoy themselves, to stay active, or to earn discretionary income. The ability to retire in their 50s was also made possible by more generous financial resources.

The remaining Americans follow three other paths, Vanguard reported. The Never Retire path (10% of respondents) includes those individuals who say they never plan to stop working; the Returnees path (5% of respondents) are those who retired early but then returned to work for financial and psychological reasons; and the Spouse’s Retirement path (9% of respondents) represent individuals who had lower participation in full-time work in their 40s and 50s and pegged their retirement to that of their spouses.

The Vanguard study had two components: a qualitative portion consisting of interviews with 38 men and women, age 40-75, and a quantitative component containing a survey of nearly 2,500.

A copy of the study is here .