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What can we learn from retirement expectations data?

  • Richard Disney

    ()

    (Institute for Fiscal Studies and University of Nottingham)

  • Sarah Tanner

This paper analyses retirement expectations and outcomes using the two waves of the UK Retirement Survey, undertaken in 1988-89 and 1994. We argue that responses to questions on expectations are not straightforward to interpret where individuals are asked to report point expectations. As in the studies for the US by Bernheim, the evidence here suggests that individuals tend to report their most likely retirement date. About half of the sample retired when they expected. Men tend to retire earlier than expected on average, but with only two waves of data we cannot reject that this is caused by a common shock over the period. Changes in health and marital status are linked to divergences between expectations and realisations. We extend the analysis to consider ѤonҴ know' responses, which we argue may be a rational response when individuals face greater uncertainty over their future retirement date. We provide evidence to support this hypothesis. Finally, we show that information on expectations can improve the accuracy of models of actual retirement behaviour, most likely because they provide a suitable proxy for unobserved tastes for income and leisure.

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File URL: http://www.ifs.org.uk/wps/wp9917.pdf
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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W99/17.

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Length: 30 pp
Date of creation: Jul 1999
Date of revision:
Handle: RePEc:ifs:ifsewp:99/17
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  1. Sarah Tanner, 1998. "The dynamics of male retirement behaviour," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 175-196, May.
  2. F. Thomas Juster & James P. Smith, 2004. "Improving the Quality of Economic Data: Lessons from the HRS and AHEAD," Labor and Demography 0402010, EconWPA.
  3. Manski, C.F., 1989. "The Use Of Intentions Data To Predict Behaviour : A Best- Case Analysis," Working papers 8905, Wisconsin Madison - Social Systems.
  4. B. Douglas Bernheim, 1987. "The Timing of Retirement: A Comparison of Expectations and Realizations," NBER Working Papers 2291, National Bureau of Economic Research, Inc.
  5. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-84, May.
  6. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September.
  7. J. Dominitz & C. F. Manski, . "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers 1050-94, University of Wisconsin Institute for Research on Poverty.
  8. John Rust & Christopher Phelan, 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Public Economics 9406005, EconWPA, revised 06 Jul 1994.
  9. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  10. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
  11. Das, J.W.M. & van Soest, A.H.O., 1995. "Expected and realized income changes : Evidence from the Dutch socio-economic panel," Discussion Paper 1995-52, Tilburg University, Center for Economic Research.
  12. Carlson, John A & Parkin, J Michael, 1975. "Inflation Expectations," Economica, London School of Economics and Political Science, vol. 42(166), pages 123-38, May.
  13. Richard Blundell & Paul Johnson, 1997. "Pensions and Retirement in the UK," NBER Working Papers 6154, National Bureau of Economic Research, Inc.
  14. A. Zabalza & C. Pissarides & M. Barton, 1980. "Social security and the choice between full-time work, part-time work and retirement," NBER Chapters, in: Econometric Studies in Public Finance, pages 245-276 National Bureau of Economic Research, Inc.
  15. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, June.
  16. Costas Meghir & Edward Whitehouse, 1993. "Labour market transitions and retirement of men in the UK," IFS Working Papers W93/12, Institute for Fiscal Studies.
  17. Richard Disney & Costas Meghir & Edward Whitehouse, 1994. "Retirement behaviour in Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 15(1), pages 24-43, February.
  18. Joseph F. Quinn & Richard V. Burkhauser & Daniel A. Myers, 1990. "Passing the Torch: The Influence of Economic Incentives on Work and Retirement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number pt, June.
  19. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
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