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The Effect of Pension Plan Type on Retirement Age: Distinguishing Plan Incentives from Career Length Preferences

Author

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  • Colleen Flaherty Manchester

    () (Carlson School of Management, University of Minnesota, 321 19th Avenue South, Minneapolis, MN 55455, USA)

Abstract

This study uses the Retirement Confidence Survey of College and University Faculty, 2005, to examine the impact of pension plan incentives on retirement age and to understand how the widespread transition from defined benefit (DB) to defined contribution (DC) plans has affected workers. Incentives stemming from differences in pension wealth accrual patterns between DB and DC plans directly induce up to a one-year difference in expected retirement age and are indirectly responsible for up to a two-year difference due to workers sorting into plans based on preferences over career length. The results imply that failing to account for worker sorting leads to an overestimation of the transition’s effect on the average retirement age of Americans. In addition, the findings suggest that individuals choose retirement plans to diversify retirement income, which has implications for Social Security reform.

Suggested Citation

  • Colleen Flaherty Manchester, 2010. "The Effect of Pension Plan Type on Retirement Age: Distinguishing Plan Incentives from Career Length Preferences," Southern Economic Journal, Southern Economic Association, vol. 77(1), pages 104-125, July.
  • Handle: RePEc:sej:ancoec:v:77:1:y:2010:p:104-125
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    File URL: http://dx.doi.org/10.4284/sej.2010.77.1.104
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    Cited by:

    1. Gopi Shah Goda & Damon Jones & Colleen Flaherty Manchester, 2013. "Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects," NBER Working Papers 18902, National Bureau of Economic Research, Inc.
    2. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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