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The Illusory Benefits of Working Longer on Financial Preparedness for Retirement

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Abstract

Older workers with insufficient savings are advised to delay retirement. Using Health and Retirement Study data, we compare outcomes of those who delay retirement, a possibly select group, with the predictions of a typical spreadsheet model. Work to age 70 is associated with an 18 percentage-point increase in the share financially prepared for retirement, compared with a predicted 46 percentage points because most older workers claim Social Security and retirement wealth barely increases. Drawing down retirement wealth while working makes sense for most, because earnings are lower than post-retirement income, in part because many older workers voluntarily work part time.

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  • Teresa Ghilarducci & Michael Papadopoulos & Anthony Webb, 2020. "The Illusory Benefits of Working Longer on Financial Preparedness for Retirement," SCEPA working paper series. 2020-02, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepawp:2020-02
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    Cited by:

    1. Owen Davis, 2021. "Employment and Retirement Among Older Workers During the Covid-19 Pandemic," SCEPA publication series. 2021-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    2. Owen Davis, 2021. "Employment and Retirement Among Older Workers During the Covid-19 Pandemic," SCEPA working paper series. 2021-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.

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    More about this item

    Keywords

    Retirement income; Social Security claiming; Older worker labor supply;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • 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

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