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The Role of Conventional Retirement Age in Retirement Decisions

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  • Charles Brown

    (University of Michigan)

Abstract

Following Wave I HRS respondents for six waves (12 years) so that their actual retirement can be observed shows that the actual retirement hazard is substantially higher at (and around) the age that workers identified in Wave I as the "usual" retirement age for workers like them. This is true even when we control for actual age at each wave, and for baseline values of earnings, wealth, health, and marital status. We find relatively consistent evidence that those who report that there is no "usual" retirement age for workers like them tend to retire earlier than other workers – indeed, they are more likely to retire than workers who are more than three years short of their usual retirement age. The finding that workers are more likely to retire at a particular age if they regard that age as the usual retirement age for workers like them suggests that the direct measures of the usual age may be useful in more formal models of the retirement process. In a world where some workers understand the incentives they face and respond appropriately, but others are poorly informed and overwhelmed by the choices they face, the "usual" retirement age may be a starting point for modeling the behavior of the latter group of workers.

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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp120.

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Length: 24 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:mrr:papers:wp120

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  1. John Rust & Christopher Phelan, 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Public Economics 9406005, EconWPA, revised 06 Jul 1994.
  2. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," JCPR Working Papers 257, Northwestern University/University of Chicago Joint Center for Poverty Research.
  3. Gustman, Alan L. & Steinmeier, Thomas L., 2005. "The social security early entitlement age in a structural model of retirement and wealth," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 441-463, February.
  4. Alan L. Gustman & Thomas L. Steinmeier, 1999. "Employer Provided Pension Data in the NLS Mature Women's Survey and in the Health and Retirement Study," NBER Working Papers 7174, National Bureau of Economic Research, Inc.
  5. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
  6. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-84, May.
  7. Sewin Chan & Ann Huff Stevens, 2003. "What You Don't Know Can't Help You: Pension Knowledge and Retirement Decision Making," NBER Working Papers 10185, National Bureau of Economic Research, Inc.
  8. Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc.
  9. William G. Gale, 1994. "Public policies and private pension contributions," Proceedings, Federal Reserve Bank of Cleveland, pages 710-734.
  10. Peracchi, Franco & Welch, Finis, 1994. "Trends in Labor Force Transitions of Older Men and Women," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 210-42, April.
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Cited by:
  1. Martin Hering & Thomas R. Klassen, 2010. "Strengthening Fairness and Funding in the Canada Pension Plan: Is Raising the Retirement Age an Option?," Social and Economic Dimensions of an Aging Population Research Papers 263, McMaster University.
  2. Isilda Mara & Edlira Narazani, 2011. "Labour-incentive reforms at preretirement age in Austria," Empirica, Springer, vol. 38(4), pages 481-510, November.
  3. Frank Erp & Niels Vermeer & Daniel Vuuren, 2014. "Non-financial Determinants of Retirement: A Literature Review," De Economist, Springer, vol. 162(2), pages 167-191, June.

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