The Retirement Decision: Current Influences on the Timing of Retirement among Older Workers

PENSION FUND RISK MANAGEMENT: FINANCIAL AND ACTUARIAL MODELING, Ch. 13, M. Micocci, G. Gregoriou, G. Masala, Chapman and Hall, January 2010

34 Pages Posted: 20 Dec 2007 Last revised: 29 Sep 2009

Gaobo Pang

Northern Trust Asset Management

Mark J. Warshawsky

Towers Watson

Ben Weitzer

Willis Towers Watson

Date Written: February 25, 2008

Abstract

This paper investigates the influences on retirement behavior among older workers who were surveyed by the Health and Retirement Study (1992-2004). It is found that increases in all categories of wealth (pension, housing equity and other financial wealth) raise the probability of retiring, while good earnings prospects induce continued employment. Retirement plan types have significant impacts: workers covered by defined benefit (DB) plans are more likely to retire, while the defined contribution (DC) plan coverage significantly delays retirement. Furthermore, the probability and thus timing of retirement for DC plan participants are susceptible to the influence of business cycles through income flow fluctuations that are due to investment performance and interest rate changes. Health insurance (HI), if conditional on employment, strongly defers retirement, while alternative sources of insurance such as employer-sponsored retiree HI, spouse's HI, public HI or COBRA coverage, encourages labor force exit. The scheduled increases in the full retirement age for Social Security act to encourage younger cohorts to work longer.

Keywords: Retirement, Social Security, Defined Benefit and Defined Contribution Plans, Health Insurance, Business Cycle

JEL Classification: J26, H55, J32, E32, H51

Suggested Citation

Pang, Gaobo and Warshawsky, Mark J. and Weitzer, Ben, The Retirement Decision: Current Influences on the Timing of Retirement among Older Workers (February 25, 2008). PENSION FUND RISK MANAGEMENT: FINANCIAL AND ACTUARIAL MODELING, Ch. 13, M. Micocci, G. Gregoriou, G. Masala, Chapman and Hall, January 2010. Available at SSRN: https://ssrn.com/abstract=1077637

Gaobo Pang (Contact Author)

Northern Trust Asset Management ( email )

50 South LaSalle Street
Chicago, IL 60603
United States
3126306980 (Phone)

HOME PAGE: http://www.northerntrust.com

Mark J. Warshawsky

Towers Watson ( email )

Arlington, VA
United States

Ben Weitzer

Willis Towers Watson ( email )

875 Third Avenue
New York, NY 10022
United States

Paper statistics

Downloads
425
Rank
53,042
Abstract Views
1,746