Disability Insurance Incentives and the Retirement Decision: Evidence from the U.S

56 Pages Posted: 2 Feb 2015 Last revised: 25 Feb 2022

See all articles by Courtney Coile

Courtney Coile

Wellesley College; National Bureau of Economic Research (NBER)

Date Written: January 2015

Abstract

A rising share of older workers in the U.S. make use of the Disability Insurance (DI) program in their transition to retirement, with about one in seven men and one in nine women ages 60 to 64 now enrolled in the program. This study explores how financial incentives from Social Security and DI affect retirement decisions, using an option value approach. We find that financial incentives have a significant effect on retirement, particularly for those in poor health or with low education, who may be more actively considering retirement at younger ages. Simulations suggest that increasing the stringency of the screening process for DI would increase the expected working life of DI applicants.

Suggested Citation

Coile, Courtney, Disability Insurance Incentives and the Retirement Decision: Evidence from the U.S (January 2015). NBER Working Paper No. w20916, Available at SSRN: https://ssrn.com/abstract=2558968

Courtney Coile (Contact Author)

Wellesley College ( email )

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National Bureau of Economic Research (NBER)

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