Retirement Choices by State and Local Public Sector Employees: The Role of Eligibility and Financial Incentives

34 Pages Posted: 15 Jan 2019

See all articles by Leslie E. Papke

Leslie E. Papke

Michigan State University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2019

Abstract

I analyze the effects of state public pension parameters on the retirement of public employees. Using a panel data set of public sector workers from 12 waves of the Health and Retirement Study, I model the probability of retirement as a function of pension wealth at early and normal retirement eligibility and Social Security coverage in the public sector job. I find that becoming eligible for early retirement, or receiving an early-out offer, significantly increases the probability of retiring. I do not find any effect of retirement wealth levels; instead the findings are consistent with the literature on default options in defined contribution plans. These findings suggest that state legislative action to affect retirement decisions and reduce future pension costs may be most effective operating through plan eligibility rules and early-out incentives.

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Suggested Citation

Papke, Leslie E., Retirement Choices by State and Local Public Sector Employees: The Role of Eligibility and Financial Incentives (January 2019). NBER Working Paper No. w25436. Available at SSRN: https://ssrn.com/abstract=3315241

Leslie E. Papke (Contact Author)

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States
517-355-3773 (Phone)
517-432-1068 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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