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Why Are Retirement Rates So High at Age 65?

In: Advances in the Economics of Aging

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  • Robin L. Lumsdaine
  • James H. Stock
  • David A. Wise

Abstract

In most data sets of labor force participation of the elderly, an empirical regularity that emerges is that retirement rates are particularly high at age 65. While there are numerous economic reasons why individuals may choose to retire at 65, empirical models that have attempted to explain the age-65 spike have met with limited success. Interpreted another way, while many models would predict a jump in the hazard rate at age 65, the magnitude of the spike indicates excessive response given the economic considerations that retirees typically face. This paper considers the puzzle of why retirement rates are so high at age 65 and explores a variety of explanations.

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This chapter was published in:

  • David A. Wise, 1996. "Advances in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise96-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7318.

    Handle: RePEc:nbr:nberch:7318

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    1. Rust, J., 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Working papers, Wisconsin Madison - Social Systems 9430, Wisconsin Madison - Social Systems.
    2. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, Econometric Society, vol. 59(1), pages 189-210, January.
    3. Jonathan Gruber & Brigitte Madrian, 1993. "Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage," NBER Working Papers 4594, National Bureau of Economic Research, Inc.
    4. John P. Rust, 1989. "A Dynamic Programming Model of Retirement Behavior," NBER Chapters, in: The Economics of Aging, pages 359-404 National Bureau of Economic Research, Inc.
    5. Alan L. Gustman & Thomas L. Steinmeier, 1993. "Employer Provided Health Insurance and Retirement Behavior," NBER Working Papers 4307, National Bureau of Economic Research, Inc.
    6. Alan L. Gustman & Thomas L. Steinmeier, 1983. "A Structural Retirement Model," NBER Working Papers 1237, National Bureau of Economic Research, Inc.
    7. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
    8. Lumsdaine, Robin L. & Stock, James H. & Wise, David A., 1990. "Efficient windows and labor force reduction," Journal of Public Economics, Elsevier, Elsevier, vol. 43(2), pages 131-159, November.
    9. Laurence J. Kotlikoff & David A. Wise, 1987. "Pension Backloading, Wage Taxes, and Work Disincentives," NBER Working Papers 2463, National Bureau of Economic Research, Inc.
    10. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 708-20, September.
    11. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, Econometric Society, vol. 62(1), pages 117-56, January.
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