31 Pages Posted: 17 Jul 2006
Date Written: July 2006
This paper uses the receipt of an inheritance to measure the effect of wealth shocks on retirement. Using the Health and Retirement Study (HRS), we first document that inheritance receipt is common among older workers - one in five households receives an inheritance over an eight-year period, with a median value of about $30,000. We find that inheritance receipt is associated with a significant increase in the probability of retirement. In particular, we find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period. Importantly, this effect is stronger when the inheritance is unexpected and thus more likely to represent an exogenous shock to wealth.
Keywords: Retirement, inheritance, labor supply, wealth, wealth effect, bequest
JEL Classification: J14, J26
Suggested Citation: Suggested Citation
Brown, Jeffrey R. and Coile, Courtney and Weisbenner, Scott J., The Effect of Inheritance Receipt on Retirement (July 2006). Available at SSRN: https://ssrn.com/abstract=915818 or http://dx.doi.org/10.2139/ssrn.915818