Stated Preference Analysis of Full and Partial Retirement in the United States

Abstract

In the traditional retirement scenario, individuals work full-time until a given age and then stop working abruptly. In the alternative partial retirement scenario, individuals work part-time for several years before they stop working. For the individual, partial retirement provides a smooth transition to full-retirement where they gradually adjust to a possibly lower income and more leisure time in full-retirement, and for the economy, it is a potential policy tool to keep people employed longer. The models developed to explain the retirement decisions of older workers are typically estimated using observed data from which it is it is di cult to identify the retirement options available to employees because they are unobserved or the information on these options are incomplete. In particular, employers often do not provide partial retirement opportunities so that adequate historical data are hardly available. In this paper, we use stated preference data to identify the true preferences of individuals for full and partial retirement plans. We consider a choice set of hypothetical full and partial retirement plans, which otherwise could be constrained to the available retirement plans from the employer, and ask the survey respondents of the American Life Panel aged over 40 years old to choose their favorite retirement plan. We analyze the choice of a particular retirement plan and its possible economic and noneconomic determinants.