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Does retiree health insurance encourage early retirement?

  • Nyce, Steven
  • Schieber, Sylvester J.
  • Shoven, John B.
  • Slavov, Sita Nataraj
  • Wise, David A.

The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 54 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 through 64. Coverage that includes an employer contribution is associated with a 6.3 percentage point (36.2%) increase in the probability of turnover at age 62, a 7.7 percentage point (48.8%) increase in the probability of turnover at age 63, and a 5.5 percentage point (38.0%) increase in the probability of turnover at age 64. Conditional on working at age 57, such coverage reduces the expected retirement age by almost three months and reduces the total number of person-years worked between ages 58 and 64 by 5.6%.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 104 (2013)
Issue (Month): C ()
Pages: 40-51

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Handle: RePEc:eee:pubeco:v:104:y:2013:i:c:p:40-51
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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