Retirement Behavior Research Articles

Retirement incentives and behavior of private and public sector workers

AbstractOver the past several decades, private sector workers in the USA with employed-sponsored pensions have experienced a dramatic shift from defined benefit (DB) to defined contribution plans, while this trend has been less pronounced for public sector workers. In this paper, we use data from the Health and Retirement Study to explore changes in the retirement incentives and retirement behavior of public and private sector workers over the past quarter-century. We find that both groups have become less likely to report having a DB pension or any pension. Compared to their private sector counterparts, public sector workers have a higher level of retirement wealth and a larger financial gain from continued work at older ages, and these differences by sector are growing across cohorts. Both groups respond to financial incentives in making retirement decisions. However, growing differences by sector in the gain to continued work do not appear to have translated into diverging retirement behavior, as we observe similar trends in the two groups.

Retirement Financial Behaviour: How Important Is Being Financially Literate?

Using Item Response Theory to analyse survey data from a representative sample of 551 Swedish citizens, a new 16-question measure of fact-based financial literacy is developed and validated. Uni-dimensionality of the measure is verified, and expected correlations are observed with an existing measure of fact-based financial literacy, a measure of subjective financial literacy or confidence, and age, gender, and income. A significant impact of fact-based and subjective financial literacy are found on three time-ordered stages of individuals’ retirement behaviour: planning, saving, and investment management. It is concluded that policies increasing final literacy are important in different phases of the life cycle.

How Sticky is Retirement Behavior in the U.S.? Responses to Changes in the Full Retirement Age

We study how increases in the Social Security full retirement age (FRA) affect benefit claiming and retirement behavior, and specifically the interaction between these two choices. Using Social Security administrative data, we implement complementary research designs of a traditional cohort analysis and a regression-discontinuity design. We find that while increases in the FRA strongly and immediately shift claiming ages, retirement ages exhibit persistent at the old FRA of 65. We use several strategies to explore the likely mechanisms behind the stickiness in retirement, and we find suggestive evidence of a role for employers in individuals' responses to the FRA.

Association between retirement behavior and financial goals: A comparison between urban and rural citizens in China

This study compares the financial planning behavior of urban and rural citizens in China. Data from 399 urban citizens and 315 rural citizens were analyzed by applying the structural equation model...

The Impact of Bequest Motives on Retirement Behavior in Japan: A Theoretical and Empirical Analysis

In this paper, we conduct a theoretical and empirical analysis of the impact of bequest motives on the work and retirement behavior of households in Japan using micro data from the Preference Parameters Study of Osaka University. Our empirical findings are consistent with our theoretical model and show that respondents with an altruistic or strategic/exchange bequest motive work more at the intensive margin than those without any bequest motive but that respondents with a strategic or exchange bequest motive work less at the extensive margin (i.e., retire earlier) than those without any bequest motive. Our findings for the strategic or exchange motive suggest that respondents with such a motive tend to work harder than others before they retire so that they can earn more, leave a larger bequest to their children, and elicit more care from them but that they tend to retire earlier than others so that they can start receiving care for themselves and their spouses from their children sooner. A policy implication of our findings is that the exchange of bequests for the care of parents by children may be very sensitive to the inheritance tax framework.

Organization’s Human Resource Practices: Determinants of Employees Retirement Preparedness in the Context of Kenya

The premise that human resource (the people) is the most valuable of all organizational resources presupposes the need for organizational strategies to secure the future of both the organization and employees. The role played by employer organizations in employee separation planning is imperative in providing insight into the human resource practices geared towards employees’ eventual retirement. However, separation decisions are ignored in theory and practice, and even the little attempts made has inherent weaknesses. This has left employees’ retirement planning being a concern of individuals just about to retire or otherwise plunging into retirement life without planning at all. Separation planning predicts higher levels of individual’s postretirement adjustment across various occupational settings in both public and private sectors. There is therefore need for judicious management of retirement transition by individual employees and employers through promotion of sound human resource practices. The human resource practices should intentionally influence individual employee’s retirement behaviours by triggering planning for the eventual separation and hence retirement preparedness. The purpose of this study was to assess the effect of organization’s human resource practices and retirement preparedness among public secondary school teachers’ in Kenya. The target population was 1,238 teachers aged 50 years and above, employed in public secondary schools by the Teachers Service Commission in Kirinyaga and Murang’a Counties by 2017. A representative sample of 334 respondents was selected using multistage sampling technique. Data was collected using semi structured questionnaire and interview guide. Logit regression was used to establish the relationships between variables in the study and to test hypotheses at P ≤ 0.05 at 95% confidence level. The study found that human resource practices influence retirement preparedness positively. The study therefore concluded that sound HR practices should be put in place by the employer organizations to offer conducive environment that make employee separation planning and retirement preparedness possible. The study recommended the government through its agencies and/or Commissions to enact frameworks that enforce, monitor and evaluate diversified human resource practices for employer organizations to establish policies and guidelines that facilitate employees’ engagement in programmes that ensure a continuous process of separation planning for successful retirement preparedness.

Social Security Reforms and the Changing Retirement Behavior in Germany

As much like other industrialized countries, in recent decades the employment rate in Germany for those aged 55 to 69 had been declining first to considerably rise again afterwards. This paper investigates the role of structural policy changes, in particular reforms of the pension system, since 1980 in explaining this trend reversal. We summarize the institutional changes and pension reforms that may account for the trend reversal, and calculate an “implicit tax on working longer”. We find that for both men and women the increase in the employment rate coincides with a reduction in the early retirement incentive. The reduction of incentives mainly stems from the introduction of actuarial deductions for early retirement and from the abolishment of specific early retirement pathways.

Changes in food purchases at retirement in France

We estimate the impact of retirement on food expenditure and food quantities purchased, using detailed home-scan panel data on food purchases and household characteristics in France. We identify a causal relationship by exploiting the French legal minimum age for retirement as an exogenous shock to retirement behavior. Upon retirement, households significantly decrease their expenditure on food and the amount of food purchased. Households with lower pre-retirement income appear to be more severely affected. Our results indicate that the decrease in food quantities purchased at the aggregate level is driven by a decline in purchases of food from animal origins. A reduced consumption of animal based food products is likely to undermine the diet balance of retirees.

Older adults’ integration in the labour market: a global view

AbstractWhat governs labour force participation in later life and why is it so different across countries? Health and labour force participation in older ages are not strongly linked, but we observe a large variation across countries in old-age labour force participation. This points to the important role of country-specific regulations governing pension receipt and old-age labour force participation. In addition to the statutory eligibility age for a pension, such country-specific regulations include: earnings tests that limit the amount of earnings when pension benefits are received; the amount of benefit deductions for early retirement; the availability of part-time pensions before normal retirement; special regulations that permit early retirement for certain population groups; and either subsidies or extra costs for employers if they keep older employees in their labour force. This paper asks two questions: Can we link a relatively low labour force participation at ages 60–64 to country-specific regulations that make early retirement attractive? and Can we link a relatively high labour force participation at ages 65–74 to country-specific regulations that make late retirement attractive? To answer these questions, we compared the experiences in a set of developed countries around the world in order to understand better the impact of country-specific rules and laws on work and retirement behaviour at older ages and, by consequence, on the financial sustainability of pension systems.

SPOUSAL INFLUENCE ON EARLY RETIREMENT DECISIONS: ORIGINS AND MECHANISMS

The interdependence between partners raises considerable interest in the sociology of life course, work and families. Partner influences play a particularly important role in the work domain, because each partner’s work decisions have profound effects on the couple as a whole. In contrast to previous research, this study pays detailed attention to the role partners play in workers’ labor market decisions by using the case of early retirement decisions. We hypothesize that partners’ preferences for older workers’ retirement originate from altruism and self-interest. For example, partners might prefer workers to retire early because the worker’s job is highly stressful or partners might prefer workers to retire early to increase possibilities for joint leisure. Moreover, we expected that partners influence older workers’ early retirement behavior via persuasion and pressure. So, partners might either convince workers to change their preferences, or they might pressure workers to act according to the partners’ preferences, irrespective of workers’ own preferences. To adequately estimate partners’ and workers’ preferences for workers’ early retirement, we used an instrumental variable approach. This was possible due to the multi-actor longitudinal data available from a large representative sample of older workers and their partners in the Netherlands. The results support that partners’ preferences originate in altruism and self-interest and that partners influence workers through persuasion and pressure. Gender differences were marginal, with stronger signs for altruistic origins among female than male partners.

The Mental Health Effects of Asset Depletion in Retirement

Numerous studies have examined the health effect of retirement, retirement behavior, and not having assets saved for retirement, however, few have analyzed the mental health effects of running out of money during retirement. This study examines the likelihood of having mental health issues in retirement when an individual runs out of money. This research article utilizes five waves of the Health and Retirement Study, spanning from 2006 through 2014. The result suggests that individuals who are going to run out of money two years from now have an increase in the probability of having mental health issues. However, there is an even further increase in the likelihood of mental health issues when the individual actually has actually run out of money. The larger the drop in asset level (ex. $25,000 down to below $1,000 vs $5,000 down to below $1,000) the large probability of having mental health issues. With the United States currently living longer and choosing to retire earlier there increased the risk of running out of money in retirement. Which leads to an increased risk of having mental health issues throughout retirement.

Worker retirement responses to pension incentives: Do they respond to pension wealth?

Pension enhancements generate pension wealth spikes at the eligibility milestones. I analyze two major enhancements that generated different gains in pension wealth for eligible workers. The responsiveness of retirement behavior to these enhancements depends on how well workers understand their pension incentives. To test the retirement response to pension wealth, I use administrative data from Missouri teachers and leverage variation in enhancement impacts on teacher pension wealth owing to differences in teachers’ entering ages. I find that retirements respond strongly to pension enhancements, but the strength of the response does not align with their pecuniary value. My findings contribute to a growing body of research showing that workers have imperfect knowledge of their pension benefits and they use imprecise information to make retirement timing decisions.

The Intention to Paid and/or Unpaid Activities in Retirement. A Study of Older Workers in Germany

ABSTRACT Within the controversial active aging discourse in Germany, this article discusses if older people are willing to be active in retirement and which factors explain this phenomenon. Empirical analyses are based on the German representative survey “Transitions and Old Age Potentials” with an analytic sample of 1,313 blue and white collar workers born between 1946 and 1958. Results imply that intended unpaid post-retirement activities are a high priority in older adulthood. Furthermore, retirement planning shows the strongest association between paid and unpaid activities. Aside from actual retirement behavior, this study underlines the relevance of intended post-retirement work as an important facet in the active aging discourse.

Retirement Effect on Health Status and Health Behaviors in Urban China.

This paper analyzes the causal impact of retirement in China on Body Mass Index (BMI) and weight, which are a good gauge of the risk for some diseases. Many middle income developing countries are aging very rapidly and may have to adjust the retirement age to have financially feasible government budgets. It is important to know and understand any plausible health consequences of raising the retirement age in developing countries, and which sub-populations within these countries may be most affected. By using 2011, 2013 and 2015 waves of the China Health and Retirement Longitudinal Study (CHARLS), our identification strategy uses variation in China's mandatory retirement age with a fuzzy discontinuity design to examine an exogenous shock to retirement behavior. Our study finds that retirement will increase weight and BMI among men. This effect is much larger for men with low education. The channel may be that men with low education drink more and take less vigorous exercises after they get retired. Retirement does not affect weight and BMI for women. These effects are robust with different definitions of retirement, narrow retirement bandwidth for samples as well as dropping samples with rural Hukou.

Gender differences in the retirement behaviour of the elderly using non-linear decomposition methods

Purpose- This paper examines factors of the gender disparity among British people on their retirement decisions using nonlinear decomposition methods and which factors cause gender differentials in retirement decisions between 1991 and 2013. In this respect, both the British Household Panel Survey and Understanding Society are utilised. Methodology- Both Fairlie (1999) and Yun (2004) methods are used to examine the impacts of observed demographic and income factors on gender differentials of retirement decisions. Findings- Age, hourly earnings, non-labour income and pension eligibility increase the gender gap, whereas education, good health conditions and being a homeowner act to reduce the gender gap. Conclusion- Even though the labour force participation of older women has consistently been increasing over the past two decades, the gender disparity influenced by demographic and financial factors has not been significantly reduced over time. The demographic and financial factors mostly explained the gender gap; however, their effects significantly change due to the explained and unexplained parts during the 20-year period.

Origins and Mechanisms of Social Influences in Couples: The Case of Retirement Decisions

Abstract The interdependence between partners raises considerable interest in the sociology of life course, work, and families. Partner influences play a particularly important role in the work domain, because each partner’s work decisions have profound effects on the couple as a whole. In contrast to previous research, this article pays detailed attention to the role a partner plays in workers’ labour market decisions by analysing the case of early retirement decisions. We hypothesized that partners’ preferences for older workers’ retirement originate from altruism and self-interest. Moreover, we expected that partners influence older workers’ early retirement behaviour via persuasion and pressure. To adequately estimate partners’ and workers’ preferences for the worker’s retirement, we used an instrumental variable approach. This was possible because we collected multi-actor longitudinal data from a large representative sample of older workers and their partners in the Netherlands. The results support that spousal preferences originate in altruism and self-interest and that partners influence workers through persuasion and pressure. Gender differences in origins and mechanisms of partner influence are also discussed.

Retirement Behaviour in Austria: Effects of Incentives on Old‐Age Labour Supply

AbstractWe provide an extensive analysis of retirement behaviour in Austria with a special focus on the role of incentives delivered by the tax and benefit system in determining individual retirement decisions. A comprehensive microsimulation model of the Austrian pension system is applied to calculate retirement benefit entitlements and forward‐looking incentive measures (social security wealth, accrual rate, peak and option values) on an individual basis. We use the calculated incentive measures as the main explanatory variables in probit models to explain retirement decisions. We base our microsimulation and estimations on an extensive administrative Austrian data set. These data contain information on more than 300,000 new retirees from the period 2001–11. We provide robust evidence that incentive measures are well suited to explaining individual retirement decisions.

The Effects of a Retirement Age Reform on Couples' Labor Supply Decisions

This paper estimates the effects of a reform that deferred the retirement age in Israel on spouses' labor supply. We utilize a detailed administrative dataset to study the implications of the reform, which raised both men's and women's ages of retirement benefits concurrently, in order to estimate spouses' retirement decisions and to understand their interdependencies. We find that own retirement age deferral increases own labor supply for both genders. However, spillover effects of one spouse's retirement age deferral on the other spouse's retirement behavior differ by gender. For men, labor supply does not depend on their wife’s retirement age deferral. For women, however, postponing their husband’s retirement age increases their labor supply if their own retirement age is not increased, but does not further increase their labor supply if own retirement age is already postponed.

Quality of Life and Health: Influence of Preparation for Retirement Behaviors through the Serial Mediation of Losses and Gains.

The dynamic theory of resources is a recent approach that provides a theoretical framework for understanding, forecasting, and examining the relationships between people’s resources and their adaptation to retirement. This article focuses on the transition to retirement in order to better understand how retirees’ perceptions of their gains and losses when they approach retirement significantly explain their well-being after retirement. Moreover, we explore the relationship between people’s preparation behaviors before retirement (T1) and their quality of life and health after retirement (T3), taking into consideration the mediating role of perceived gains and losses in retirement (T2). This study was carried out with a sample of Spanish workers (N = 244) who were employed at T1 and had retired at T2 and T3. The results support the assertion that losses explain well-being better than gains. In addition, some specific losses showed a greater explanatory power for quality of life and health than others. The implications are discussed with a view to understanding retirement and the design of interventions.

Planning for Retirement? The Importance of Time Preferences

Ensuring retirement income security is a priority for individuals, employers, and policymakers. Using merged administrative and survey data for public sector workers in North Carolina, we explore how workers’ characteristics and preferences are associated with planning and saving for retirement. We then assess the “quality” of a retirement plan and whether retirement behavior is consistent with these plans. The findings indicate that the way that individuals discount future consumption is associated with the extent of their retirement planning and preparedness. We find that individuals who engage in retirement planning are better prepared to meet their retirement goals upon leaving their career jobs.