To What Extent Does SES Status Lead People to Retire Too Soon?

Center for Retirement Research at Boston College WP 2015-19

https://doi.org/10.3905/jor.2018.5.4.073

Posted: 21 May 2019

See all articles by Alicia H. Munnell

Alicia H. Munnell

Boston College - Center for Retirement Research

Anthony Webb

Boston College - Center for Retirement Research

Anqi Chen

Boston College - Center for Retirement Research

Date Written: August 1, 2015

Abstract

Working longer is a powerful lever to enhance retirement security. Individuals should be able to extend the number of years they work because, on average, they are healthier, live longer, and face less physically demanding jobs. But averages are misleading when discrepancies in health, job prospects, and life expectancy have widened between individuals with low and high socioeconomic status (SES). To understand the magnitude of the problem, this paper, using data from the Health and Retirement Study, specifies how much longer households in each SES quartile would need to work to maintain their pre-retirement standard of living and compares those optimal retirement ages with their planned retirement ages to calculate a retirement gap. It then uses regression analysis to explore whether the gap reflects poor circumstances or poor planning – that is, the extent to which the retirement gap results from health, employment, and marital shocks that occur before the HRS interview but too late for the household to adjust saving (between ages 50 and 58), as opposed to a gap resulting from inadequate foresight. The analysis shows that households in lower-SES quartiles have larger retirement gaps, and this pattern remains true even after controlling for late-career shocks. In short, the most vulnerable have the largest retirement gaps, and these gaps arise from poor planning rather than late-career shocks.

Suggested Citation

Munnell, Alicia and Webb, Anthony and Chen, Anqi, To What Extent Does SES Status Lead People to Retire Too Soon? (August 1, 2015). Center for Retirement Research at Boston College WP 2015-19. Available at SSRN: https://ssrn.com/abstract=2658162 or http://dx.doi.org/10.2139/ssrn.2658162

Alicia Munnell (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Anthony Webb

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Anqi Chen

Boston College - Center for Retirement Research ( email )

Boston, MA
United States
6175521762 (Phone)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
574
PlumX Metrics