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Retirement Timing Uncertainty: Empirical Evidence and Quantitative Evaluation

Author

Listed:
  • Frank Caliendo

    (Utah State University)

  • Maria Casanova

    (California State University, Fullerton)

  • Aspen Gorry

    (Clemson University)

  • Sita Nataraj Slavov

    (George Mason University)

Abstract

People often retire at a different age than expected. We construct a measure of retirement timing uncertainty and find that the standard deviation of the difference between retirement expectations and actual retirement dates ranges from 3 to 6 years. To understand the potential implications of this uncertainty, we develop a simple model of exogenous but risky retirement. In this environment, individuals would give up 1.0%-4.5% of total lifetime consumption to fully insure this risk and 0.8%-3.2% of lifetime consumption simply to know their actual retirement date upon entering the labor force. This is crucial for retirement planning purposes because not saving to hedge this risk would leave individuals with even larger welfare costs. (Copyright: Elsevier)

Suggested Citation

  • Frank Caliendo & Maria Casanova & Aspen Gorry & Sita Nataraj Slavov, 2023. "Retirement Timing Uncertainty: Empirical Evidence and Quantitative Evaluation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 226-266, December.
    • Handle: RePEc:red:issued:19-7
    DOI: 10.1016/j.red.2023.01.002
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