Spousal Health Shocks and the Timing of the Retirement Decision in the Face of Forward-Looking Financial Incentives

Boston College Center for Retirement Research Working Paper No. 2010-7

70 Pages Posted: 29 Jun 2010

See all articles by Norma Coe

Norma Coe

University of Pennsylvania - Perelman School of Medicine

Courtney Van Houtven

Duke University

Date Written: June 1, 2010

Abstract

A long and still growing strand of the retirement literature examines the role financial incentives play in the timing of the retirement decision. A more recent second strand of work has focused on the role of health shocks in the retirement decision. This paper combines these two components of the literature in order to measure the marginal impact of current wealth (including pension accrual), forward-looking financial incentives (peak-value pension wealth), and health shocks on married individuals’ retirement decision. This paper helps to clarify whether previously omitted forward-looking financial incentives can explain the strong role attributed to health shocks in the retirement decisions of coupled individuals. We find that financial incentives are the most important determinant of retirement behavior empirically. A husband is about half as responsive to his wife’s financial incentives as he is to his own. Interestingly, we find that married men are responsive to their wives’ health shocks, on both the intensive and extensive margin, but find wives’ decisions concerning work are largely unaffected by their husbands’ health shocks.

Suggested Citation

Coe, Norma and Van Houtven, Courtney, Spousal Health Shocks and the Timing of the Retirement Decision in the Face of Forward-Looking Financial Incentives (June 1, 2010). Boston College Center for Retirement Research Working Paper No. 2010-7. Available at SSRN: https://ssrn.com/abstract=1632431 or http://dx.doi.org/10.2139/ssrn.1632431

Norma Coe

University of Pennsylvania - Perelman School of Medicine ( email )

423 Guardian Drive
Philadelphia, PA 19104
United States

Courtney Van Houtven (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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