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Why are Retirement Rates So High at Age 65?

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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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5190.

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Date of creation: Jul 1995
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Publication status: published as Advances in the Economics of Aging, ed. David Wise, University of Chicago Press, 1996, pp. 61-82
Handle: RePEc:nbr:nberwo:5190

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  1. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, Econometric Society, vol. 62(1), pages 117-56, January.
  2. Jonathan Gruber & Brigitte C. Madrian, 1996. "Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage," NBER Chapters, in: Advances in the Economics of Aging, pages 115-146 National Bureau of Economic Research, Inc.
  3. Alan L. Gustman & Thomas L. Steinmeier, 1993. "Employer Provided Health Insurance and Retirement Behavior," NBER Working Papers 4307, National Bureau of Economic Research, Inc.
  4. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, Econometric Society, vol. 65(4), pages 781-832, July.
  5. Laurence J. Kotlikoff & David A. Wise, 1987. "Pension Backloading, Wage Taxes, and Work Disincentives," NBER Working Papers 2463, National Bureau of Economic Research, Inc.
  6. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, Econometric Society, vol. 58(5), pages 1151-80, September.
  7. Alan L. Gustman & Thomas L. Steinmeier, 1983. "A Structural Retirement Model," NBER Working Papers 1237, National Bureau of Economic Research, Inc.
  8. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, Econometric Society, vol. 59(1), pages 189-210, January.
  9. John Rust, 1987. "A Dynamic Programming Model of Retirement Behavior," NBER Working Papers 2470, National Bureau of Economic Research, Inc.
  10. 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.
  11. 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.
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