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What can we learn from retirement expectations data?

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Author Info
Richard Disney () (Institute for Fiscal Studies and University of Nottingham)
Sarah Tanner

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Abstract

This paper analyses retirement expectations and outcomes using the two waves of the UK Retirement Survey, undertaken in 1988-89 and 1994. We argue that responses to questions on expectations are not straightforward to interpret where individuals are asked to report point expectations. As in the studies for the US by Bernheim, the evidence here suggests that individuals tend to report their most likely retirement date. About half of the sample retired when they expected. Men tend to retire earlier than expected on average, but with only two waves of data we cannot reject that this is caused by a common shock over the period. Changes in health and marital status are linked to divergences between expectations and realisations. We extend the analysis to consider ѤonҴ know' responses, which we argue may be a rational response when individuals face greater uncertainty over their future retirement date. We provide evidence to support this hypothesis. Finally, we show that information on expectations can improve the accuracy of models of actual retirement behaviour, most likely because they provide a suitable proxy for unobserved tastes for income and leisure.

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Publisher Info
Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W99/17.

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Length: 30 pp
Date of creation: Jul 1999
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Handle: RePEc:ifs:ifsewp:99/17

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Related research
Keywords: Retirement behaviour; expectations;

Find related papers by JEL classification:
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    Other versions:
  2. Carlson, John A & Parkin, J Michael, 1975. "Inflation Expectations," Economica, London School of Economics and Political Science, vol. 42(166), pages 123-38, May. [Downloadable!] (restricted)
  3. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA. [Downloadable!]
    Other versions:
  4. Das, M. & Soest, A. van, 1995. "Expected and Realized Income Changes : Evidence from the Dutch Socio-Economic Panel," Discussion Paper 52, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  5. B. Douglas Bernheim, 1989. "The Timing of Retirement: A Comparison of Expectations and Realizations," NBER Chapters, in: The Economics of Aging, pages 335-358 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  6. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January. [Downloadable!] (restricted)
  7. Alan L. Gustman & Thomas L. Steinmeier, 1986. "A Structural Retirement Model," NBER Working Papers 1237, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Meghir, Costas & Whitehouse, Edward, 1997. "Labour market transitions and retirement of men in the UK," Journal of Econometrics, Elsevier, vol. 79(2), pages 327-354, August. [Downloadable!] (restricted)
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  9. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-84, May. [Downloadable!] (restricted)
  10. repec:att:wimass:19895 is not listed on IDEAS
  11. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September. [Downloadable!] (restricted)
    Other versions:
  12. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September. [Downloadable!] (restricted)
  13. Zabalza, A. & Pissarides, C. & Barton, M., 1980. "Social security and the choice between full-time work, part-time work and retirement," Journal of Public Economics, Elsevier, vol. 14(2), pages 245-276, October. [Downloadable!] (restricted)
    Other versions:
  14. Richard Blundell & Paul Johnson, 1997. "Pensions and Retirement in the UK," NBER Working Papers 6154, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Richard Disney & Costas Meghir & Edward Whitehouse, 1994. "Retirement behaviour in Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 15(1), pages 24-43, February.
  16. Sarah Tanner, 1998. "The dynamics of male retirement behaviour," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 175-196, May. [Downloadable!]
  17. F. Thomas Juster & James P. Smith, 2004. "Improving the Quality of Economic Data: Lessons from the HRS and AHEAD," Labor and Demography 0402010, EconWPA. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Deborah A. Cobb-Clark & Steve Stillman, 2006. "The Retirement Expectations of Middle-Aged Individuals," CEPR Discussion Papers 540, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
    Other versions:
  2. Mauro Mastrogiacomo, 2004. "On Expectations, Realizations and Partial Retirement," Tinbergen Institute Discussion Papers 04-052/3, Tinbergen Institute. [Downloadable!]
  3. Steven Haider & Mel StephensJr., 2006. "How Accurate are Expected Retirement Savings?," Working Papers wp128, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  4. Hugo Benítez-Silva & Debra S. Dwyer, 2003. "Expectation Formation of Older Married Couples and the Rational Expectations Hypothesis," Working Papers wp062, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
    Other versions:
  5. Steven Haider & Melvin Stephens Jr., 2004. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," NBER Working Papers 10257, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Renata Bottazzi & Tullio Jappelli & Mario Padula, 2006. "Retirement Expectations, Pension Reforms, and Their Impact on Private Wealth Accumulation," CFS Working Paper Series 2006/10, Center for Financial Studies. [Downloadable!]
    Other versions:
  7. Luigi Guiso & Tullio Jappelli & Mario Padula, 2009. "Pension Risk, Retirement Saving and Insurance," Economics Working Papers ECO2009/18, European University Institute. [Downloadable!]
    Other versions:
  8. Mauro Mastrogiacomo, 2006. "Testing consumers' asymmetric reaction to wealth changes," CPB Discussion Papers 53, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  9. Tullio Jappelli & Mario Padula & Renata Bottazzi, 2003. "Retirement Expectations and Pension Reforms," CSEF Working Papers 92, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  10. Pierre-Carl Michaud & Arthur van Soest, 2007. "How Did the Elimination of the Earnings Test above the Normal Retirement Age Affect Retirement Expectations?," IZA Discussion Papers 2868, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Whitehouse, Edward, 2000. "Pension reform, financial literacy and public information: a case study of the United Kingdom," MPRA Paper 10323, University Library of Munich, Germany. [Downloadable!]
  12. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2005. "Retirement Expectations, Pension Reforms and Their Effect on Private Wealth Accumulation," CEPR Discussion Papers 4882, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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