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Worker retirement responses to pension incentives: Do they respond to pension wealth?

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  • Kim, Dongwoo

Abstract

Pension enhancements generate pension wealth spikes at the eligibility milestones. I analyze two major enhancements that generated different gains in pension wealth for eligible workers. The responsiveness of retirement behavior to these enhancements depends on how well workers understand their pension incentives. To test the retirement response to pension wealth, I use administrative data from Missouri teachers and leverage variation in enhancement impacts on teacher pension wealth owing to differences in teachers’ entering ages. I find that retirements respond strongly to pension enhancements, but the strength of the response does not align with their pecuniary value. My findings contribute to a growing body of research showing that workers have imperfect knowledge of their pension benefits and they use imprecise information to make retirement timing decisions.

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  • Kim, Dongwoo, 2020. "Worker retirement responses to pension incentives: Do they respond to pension wealth?," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 365-385.
    • Handle: RePEc:eee:jeborg:v:173:y:2020:i:c:p:365-385
    DOI: 10.1016/j.jebo.2019.10.016
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    Cited by:

    1. Fuchsman, Dillon & McGee, Josh B. & Zamarro, Gema, 2023. "Teachers’ willingness to pay for retirement benefits: A national stated preferences experiment," Economics of Education Review, Elsevier, vol. 92(C).
    2. Fuchsman, Dillon & McGee, Josh & Zamarro, Gema, 2022. "Teachers’ Knowledge and Preparedness for Retirement: Results from a Nationally Representative Teacher Survey," Working Papers 21-5, Sinquefield Center for Applied Economic Research, Saint Louis University.
    3. Robert M. Costrell & Josh McGee, 2019. "Cross-Subsidization of Teacher Pension Costs: The Case of California," Education Finance and Policy, MIT Press, vol. 14(2), pages 327-354, Spring.
    4. Zhu, Rong, 2021. "Retirement and voluntary work provision: Evidence from the Australian Age Pension reform," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 674-690.

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    More about this item

    Keywords

    Retirement behavior; Behavioral finance; Pension;
    All these keywords.

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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