Affect Retirement Decisions Research Articles

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income

Abstract We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event study design. We first examine individual and household earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra ${\$}$1 of unearned income in a given period reduces household labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption expenditure by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Next we examine margins of adjustment other than earnings and, in the course of doing so, address a number of important economic questions about how additional wealth or unearned income affect retirement decisions and labor market dynamics, family formation and dissolution, entrepreneurship and self-employment, and geographic mobility and neighborhood choice. Last, we carefully compare our findings to those reported in existing lottery studies. This comparison reveals that existing U.S. studies substantially underestimate wealth and income effects because they use measures that understate the earnings responses and overstate the after-tax wealth changes associated with lottery wins.

Stress among UK consultant urologists and factors influencing when they leave full-time NHS practice

Objective: The UK medical workforce is in crisis. The number of surgeons in National Health Service (NHS) practice has decreased, partly because newly qualified doctors withdraw from the workforce, and partly because of the early retirement of experienced surgeons. The reasons for urological trainee loss are largely known, but stress factors influencing the retirement of consultants before state pension age (SPA) are not. Methods: An online survey of the consultant membership of the British Association of Urological Surgeons was carried out over a 12-week period starting in September 2020. Information was sought regarding stresses at work and home, together with factors affecting retirement decisions. Data analysis was performed if > 90% of questions were complete. Results: Overall, 36.5% of 1374 invitees completed the survey. Workplace-based issues were the main causes of stress: on-call, an unsupportive working environment, complaint handling and poor relations with hospital managers were predominant factors which were exacerbated by punitive taxation. Experienced urologists ameliorated these factors by reducing their contracted activity, increasing part-time working and, ultimately, retiring before SPA. Conclusions: Workplace-based factors are associated with stress reported by consultant urologists. Alleviation of stressor factors, especially those related to on-call activity, should be explored to reduce the erosion of the senior workforce. Level of evidence: Not applicable

Re-examining female labor supply responses to the 1994 Australian pension reform

Many governments are aiming to extend working lives by raising the age at which people can claim retirement pensions. This makes it vital to understand how these policies affect retirement decisions. In this paper, I revisit the labor supply effects of a major Australian reform that increased women’s pension age from 60 to 65. Atalay and Barrett (2015) studied these effects using repeated household surveys and a differences-in-differences design in which male cohorts form the comparison group. They estimate that the reform increased female labor force participation by 12 percentage points. Using earlier data, I show that the parallel-trends assumption did not hold before the reform because of a strong female-specific trend in participation rates across the relevant cohorts. Accounting for this trend, the estimated effect on female participation falls by two-thirds and becomes statistically insignificant at conventional levels. This highlights the importance of carefully assessing and controlling for trends across cohorts when evaluating pension reforms, which are typically phased in across cohorts.

Factors Contributing to Retirement Decisions in Denmark: Comparing Employees Who Expect to Retire before, at, and after the State Pension Age.

Aim: Analyse factors affecting retirement decisions comparing employees expecting to retire before, at, and after the state pension age. Methods: In the SeniorWorkingLife cohort, 12,269 workers aged +50 replied to questions about expected retirement age, reasons for leaving, and reasons for staying longer. Results: For all groups, poor health, wish for more leisure, and economy were the most salient expected reasons for retiring. Many would stay longer if there were better possibilities for more leisure time, more work flexibility, and economic benefits. Those expecting to retire before state pension age were more likely to point at desire for more leisure time as expected reason for retiring, and less likely to point at economic reasons, and more likely to point at health and work demands as possible reasons for prolonging working life. Those expecting to retire after state pension age were more likely to point at external factors and recognition from the management. Conclusion: Factors influencing retirement decisions are similar across the groups. Initiatives for better work–life balance, healthy lifestyle, and economic incentives to continue working may help prevent early retirement and motivate prolonging work life beyond retirement. Results also indicate that less strenuous work is particularly relevant to prevent early retirement.

Late-Career Expectations: A Survey of Full-Time Faculty Members Who Are 55 or Older at 14 U.S. Medical Schools.

The average age of full-time faculty members at U.S. medical schools accredited by the Liaison Committee on Medical Education was 49.5 in 2017, yet the academic medicine community knows little about late-career faculty. The authors sought to characterize full-time faculty members 55 or older and assess their work-life expectations. The authors conducted a survey (May-September 2017) of faculty 55+ at 14 U.S. medical schools. Of the 5,204 faculty members invited, 2,126 (40.8%) responded. The average age of respondents was 62.3, and among those responding to the relevant questions, most identified as male (1,425; 67.2%), white (1,841; 88.3%), and married/partnered (1,803; 85.5%). Fewer than half (915; 45.2%) indicated they had begun thinking about full-time retirement, estimating that they would do so at a mean age of 67.8 (standard deviation = 4.3). Half the respondents (1,004; 50.0%) would consider moving to part-time status. The top 3 personal factors likely to affect retirement decisions were health, postretirement plans, and spouse's/partner's plans. The top 3 professional factors were phased retirement or part-time options, changes in institutional leadership, and presence of a successor. Faculty indicated that they would, post retirement, be interested in ongoing work in teaching/education and research/scholarship and that they wanted health insurance, email, and part-time teaching opportunities. U.S. medical schools employ a rapidly aging workforce. These data indicate that neither faculty members nor institutions are prepared. Faculty affairs and develop ment leaders should champion efforts to engage with late-career faculty to prepare for this changing landscape.

Is Rising Household Debt Affecting Retirement Decisions?

Is Rising Household Debt Affecting Retirement Decisions?

Is Rising Household Debt Affecting Retirement Decisions?

Household debt among older Americans approaching retirement has increased dramatically over the past couple of decades. Older households have become increasingly more indebted and more leveraged. While mortgages remain the predominant type of debt among households in their 50s and 60s, in recent years, student loan debt has also risen among these households. Using household survey data to examine how late life debt affects retirement decisions, we find that more indebted older adults are more likely to work, less likely to be retired, and on average expect to work longer than those with less debt.

Job strain and retirement decisions in UK general practice.

Falling retention in UK general practice is a well-described problem but there has been little previous research into its underlying causes. Poor psychosocial work conditions may help explain falling workforce morale and early retirement from the profession. To explore the impact upon morale and retirement decisions of changes in psychosocial aspects of UK general practice over the course of a career. Biographical narrative interviewing method (BNIM) was used to obtain and analyse career narratives of 12 London general practitioners (GPs), aged 55-65, half of whom had retired. Findings were theorized using the Job Demands-Control-Support (JDCS) model. A spontaneous, consistent theme was evident across all 12 interviews: changes in the psychosocial work environment had contributed to a steady decline in morale. Sequential, multilayered reductions in autonomy were the most commonly cited causes for reduced enthusiasm. Increasing demands in the form of both a rising workload as well as a complaints culture drained energy and morale. The GPs described increasingly fragmented teams and therefore reduced social support for the role. Nonetheless, retirement decisions were not straightforward, provoking complex emotions. The combination of increasing demands with reduced autonomy puts practitioners under intense strain, diminishing the satisfaction they derive from their work and affecting retirement decisions. The Job Demands-Control-Support (JDCS) model is an empirically tested model that could be used to inform improved work design in general practice.

Retirement choices by state and local public sector employees: the role of eligibility and financial incentives

AbstractI 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. These findings suggest that state legislative action to affect retirement decisions and reduce future pension costs would be most effective operating through plan eligibility rules and early-out incentives.

Cohort Differences in Joint Retirement: Evidence from the Health and Retirement Study

The dramatic rise and sustained participation of recent cohorts of women in the labor force has coincided with their increased attachment to the labor market. In this paper we use twelve waves of the Health and Retirement Study (1992-2014) and investigate how married couples belonging to more recent birth cohorts compare with their predecessors in terms of coordinating their retirement decisions. Using a multinomial logit model we estimate the labor force dynamics of dual-earner married couples and find that couples with wives belonging to more recent birth cohorts are less likely to jointly exit the labor force. Further, this declining cohort trend in joint retirement can only partially be explained by commonly observed socio-economic, employment, and health related factors that affect retirement decisions, suggesting an important role for cohort changes in preferences and social norms such as preference for work and attitudes toward gender roles.

The impact of inheritances on the retirement behavior of older Europeans

The aim of this paper is to study how wealth affects retirement behavior. I use data from the 2004–2012 Survey of Health, Ageing and Retirement in Europe, covering 10 European countries. Inheritances are used as an exogenous change in wealth to estimate the causal effect of wealth/inheritance receipt on retirement. I apply binary choice models for a sample of persons working in 2004/05 to estimate the effect of inheritance receipt during 2005–2011 on the probability of retirement in 2011/12. By comparing data on expected retirement age at the beginning of the sample period with actual retirement age I am able to control for unobserved factors that might be correlated with wealth and affect retirement decisions. The main findings are: (1) Inheritance receipt is quite common for individuals nearing retirement age (50+). About 20 % of the sample aged 50 and older in 2011/12 live in households that received at least one inheritance between 2005 and 2011. (2) Inheritance receipt significantly increases the probability of retirement and the effect increases with the size of the inheritance. (3) In contrast to what life-cycle theory suggests I do not find any evidence that expected and unexpected inheritances affect adjustments of planned retirement age differently. These results are important for assessing the effect of policies that induce changes in wealth, such as pension reforms, tax reforms or reforms of Social Security, on retirement behavior.

Cognitive Ability, Expectations, and Beliefs About the Future: Psychological Influences on Retirement Decisions

Recent advances in behavioral decision research, behavioral economics, and life-span development psychology provide leverage for expanding our understanding of the decision to retire earlier versus later. This report examines how cognitive abilities, perceptions about the future, and other psychological characteristics affect retirement decisions. We use existing and new data collected through the RAND-USC American Life Panel, including detailed assessments of fluid and crystallized intelligence, financial literacy, expectations for the future, future time perspective, and maximizing versus satisficing decision styles. We find those with high levels of cognitive ability are more likely to retire later, as are those with greater longevity expectations. We also find those with lower cognitive ability have less coherent expectations of retirement—suggesting a need for planning assistance. We also find expectation of lower Social Security benefits is associated with plans to retire later—contrary to our hypothesis that such expectation might spur early retirement in an effort to lock in benefits. Finally, we find that tendencies maximize (versus satisfice) had mixed effects on retirement decision making, with different aspects of maximizing tendencies showing different relationships with retirement decision making. Future work should expand these data in a targeted direction. Recent research notes that decision-making competence can be improved with training, and to the extent this trainability extends to older adults, decision skills may be a useful target for intervention. Stronger longitudinal design and analysis can also help demonstrate possible endogenities between retirement and psychological variables.

The Effects of Health and Wealth Shocks on Retirement Decisions

Both health status and net worth can affect retirement decisions. In some cases, early retirement may be precipitated by a shock to an individual’s health and/or economic status. The authors examine how health and wealth shocks affect retirement decisions. They use data from the Panel Study of Income Dynamics to estimate a first-differences model of health and wealth shocks on retirement over the course of the 2000s in the United States. Their results suggest that acute health shocks are associated with labor market exits for older American men but not women. These results appear particularly strong for blacks, whose labor force participation seems particularly sensitive to health status, which may be due to different occupations for blacks and whites.

Equilibrium Unemployment and Retirement

As a preliminary step, we first provide some new empirical evidence that labor market conditions affect retirement decisions at the individual level: unemployed people are more likely to retire. Our main objective in this paper is then to propose an equilibrium unemployment approach to retirement decisions that allows us to unveil the factors which explain why unemployed workers choose to retire earlier and the conditions under which this behavior is optimal. Two main conclusions emerge: the retirement decision of unemployed workers depends on the labor-market frictions whereas that of employed workers does not; the existence of search externalities makes the retirement age of unemployed workers intrinsically suboptimal. Considering Social Security policy issues, we show that the complete elimination of the implicit tax on continued activity is not necessarily welfare-optimizing in a second best world where the labor market equilibrium suffers from distortions.

Time to Retire? The Effect of State Fiscal Policies on Retirement Decisions

Our research addresses the importance of state fiscal policies on the probability of retirement using a panel of individual tax return data. Results indicate that a one percentage point increase in the income or sales tax rate reduces the probability of retirement by about 8.7 percent. The evidence suggests that state spending might also affect retirement decisions but magnitudes are inconclusive. In general, the results suggest that the income effect dominates; that is, higher tax rates at the state-level reduce disposable income and decrease the probability of retiring. Results are similar in models examining single and married filers separately.

Early retirement in Europe

Retirement behaviour has been the focus of attention of much microeconomic research in recent years. At the same time, most industrialized countries are struggling with reforming their retirement systems to counteract adverse demographic shocks. Early retirement is an important aspect both in explaining retirement behaviour and in forecasting the future of welfare systems. In particular, early retirement is related to an important policy puzzle: it may be optimal to increase the legal retirement age, however we do not know enough of the behavioural response of workers to policy changes and whether these would be effective measures to counteract future fiscal imbalances. Social security systems (and many private pension plans) in Europe have encouraged early exits. This paper reviews the empirical literature on early retirement, with particular reference to OECD countries. The basic message emerging from our work is that much could be learnt by having better quality data, in particular micro-level data that could be used to estimate behavioural responses having under control the many factors affecting retirement decisions, including institutional factors and allowing for full cross country comparability.