Retirement Decisions Research Articles

Labour supply, retirement, and consumption responses of older Europeans to inheritance receipt

This study quantifies individuals’ responses to inheritance receipt in terms of their retirement, labour supply, and consumption decisions. Doing so is relevant for appraising the potential effects of tax and pension reforms, as well as for the assessment of how inheritances contribute to total wealth and to wealth inequality. I start out by developing a simple version of the life cycle model that explains how individuals trade-off between the different possible responses. I test the model using individual panel data from the Survey on Health, Aging, and Retirement in Europe. These data allow accounting for expectations about inheritances and retirement in the analysis. All estimated effects are not significantly different from zero and they indicate absence of large response in terms of labour supply and retirement.

Evaluation of an education intervention for Australian health practitioners to support people with dementia with driving decisions: A pretest-posttest survey

Objective Drivers with dementia will at some stage need to stop driving. The timing of driving retirement is informed by the advice of health practitioners, however many find this task complex and challenging as they feel unprepared or lack confidence, having limited training and education on dementia and driving. Few opportunities exist for Australian health practitioners to advance learning about dementia and driving. This study evaluated the impact of a Dementia and Driving Education Module on practitioner self-perceived knowledge, confidence, and competence in supporting people living with dementia with decisions about driving. Methods A single group, pretest-posttest survey was conducted for this study. Health practitioners were recruited over 19 months via email and invited to attend a face-to-face dementia and driving workshop. The workshop comprised of a two-hour Dementia and Driving Education Module including seven learning activities incorporating six vignettes, five self-reflections, one case study and a paper copy of a dementia and driving decision aid. Participants completed a survey prior to, immediately after and six weeks post completion of the education module. Results A total of 240 health practitioners, from over six disciplines, took part in one of eleven workshops delivered via face-to-face and online across five states of Australia. Significant increases occurred in all outcome measures of perceived knowledge, confidence and competence between baseline and immediately post-education module survey responses and between baseline and six weeks post-survey responses. Conclusions The Dementia and Driving Education Module and accompanying decision aid demonstrate an efficacious solution for a diverse range of health practitioners to enhance their knowledge, confidence, and competence in supporting people living with dementia with driving retirement decisions.

Communities in energy transition: exploring best practices and decision support tools to provide equitable outcomes

The U.S. coal industry has been in a state of decline for the past decade, a trend ushered by flat electricity demand, increased regulatory pressure, and market competition from cost-competitive clean energy sources. The receding economic viability of the coal industry has been acutely felt by the communities with immediate economic ties to coal-fired generation. With the energy transition underway, the question of how to engage communities as stakeholders in the decision-making process and address their needs through an equitable and just transition remains unresolved. To that end, this paper explores the economic, environmental, and social challenges presented by the energy transition at the community level, highlighting four case studies from transitioning coal-dependent communities across the United States to ultimately identify best practices in coal plant decommissioning processes. This paper weaves these community-identified best practices into two support tools—a decommissioning checklist and a redevelopment decision-making framework—that can be used to engage communities in the power plant retirement decision, the site reclamation phase, and eventual redevelopment of the site and revitalization of the surrounding community.

Who will I be when I retire? The role of organizational commitment, group memberships and retirement transition framing on older worker’s anticipated identity change in retirement

Retirement is an eagerly awaited life transition for many older workers, but some may anticipate their exit from the workforce will result in loss of meaningful work-based activities and social interactions. For older workers more committed to their organization, retirement might represent a threat to maintaining a consistent, positive identity. Across three pre-registered studies of US adults aged 49 to 75, we investigated the relationship between organizational commitment and anticipated identity changes in retirement. Studies 1 and 2 (N = 1059) found that older workers largely anticipated positive changes to their identity in retirement. In Study 2, we divided older workers into two conditions and used a framing manipulation to present retirement as either a ‘role exit’ or a ‘role entry’. In the ‘role exit’ condition, older workers less committed to their organization anticipated more positive changes when they held more group memberships compared to those with fewer group memberships. Those in the ‘role entry’ condition anticipated significantly more positive changes to their identity in retirement than those in the ‘role exit’ condition, but did not anticipate more positive changes based on organizational commitment or group memberships. More group memberships, but not lower organizational commitment, was associated with more positive anticipation of identity changes in retirement. Study 3 (N = 215) surveyed older adults after they had retired, finding that identity changes experienced post-retirement were less positive than those anticipated by older workers. We discuss the theoretical and applied implications of these findings for older workers’ retirement decisions and wellbeing.

Does the Formulation of the Decision Problem Affect Retirement?—Framing Effect and Planned Retirement Age

The aim of the study is to fill the research gap in relation to one of the behavioral factors that have a potential impact on retirement decisions—the framing effect. A research question addressed in the study is whether the way in which the decision-making problem is formulated (the framing effect) influences decisions on the planned retirement age. To answer this question, an original research questionnaire was developed. It included a description of a hypothetical pension system and experimental vignette questions. The research was conducted on the basis of answers given by 1079 randomly selected respondents who were participants of the pension system in Poland before retirement. In the analysis of the results, non-parametric tests and multiple logistic regression were used to compare response distributions. As a result of the conducted research, it was proven that the framing effect significantly affects the extension of the planned retirement age. At the same time, it was found that loss framing affects pension decisions to a greater extent than gain framing. It has also been noted that women are more susceptible than men to the framing of pension decisions. An application conclusion resulting from the conducted research is indicated as the possibility of the intentional use of the framing effect by decision-makers in order to increase the effective retirement age.

Recent UK retirees\u2019 views about the work-related factors which influenced their decision to retire: a qualitative study within the Health and Employment After Fifty (HEAF) cohort

BackgroundLower birth rates and increasing longevity have resulted in ageing populations in European countries. These demographic changes place challenges on pension provision as numbers of those who are economically inactive and retired increase relative to those in paid work. Therefore, governments need workers to postpone retirement and work to older ages. Whilst health and wealth are important in retirement decision-making, considerably less is known about the effects of workplace factors. The aim of this study was to explore the views of recent UK retirees about the role that work-related factors played in their decision to retire.MethodsThis qualitative study was nested within the Health and Employment After Fifty (HEAF) cohort. People who had retired 3-6 years previously (not for health reasons) were purposively sampled to obtain the views of men and women from a range of socio-economic backgrounds and jobs. Semi-structured interviews were carried out by telephone using a pre-defined topic guide. Interviews were audio-recorded, transcribed and analysed thematically.ResultsSeventeen interviews were conducted. Thematic analysis showed that retirement decisions were complex and multi-factorial but that work-related factors contributed to decision-making in two main ways. First, some work factors pushed participants towards retirement. These were perceptions that: workplace change had affected the way they were valued or increased pressure on them; work demands, including commuting, had intruded excessively on personal time, effects that were exacerbated by modern technology; work was draining, isolating or under-appreciated; and /or that work was causing physical strain or discomfort relative to their perception of their capacity. In contrast, work factors could also cause participants to pull back towards work, particularly: autonomy; supportive work colleagues; a sense of being appreciated; and perceived job flexibility.ConclusionsRecent retirees explained that their decision to retire was multi-factorial but work-related factors contributed importantly. Potentially, employers could: review workers’ perceptions about their work; their capacity in relation to job demands; increase flexibility; and facilitate a supportive work community to encourage longer working lives.

Does Machine Learning Offer Added Value Vis-à-Vis Traditional Statistics? An Exploratory Study on Retirement Decisions Using Data from the Survey of Health, Ageing, and Retirement in Europe (SHARE)

Do machine learning algorithms perform better than statistical survival analysis when predicting retirement decisions? This exploratory article addresses the question by constructing a pseudo-panel with retirement data from the Survey of Health, Ageing, and Retirement in Europe (SHARE). The analysis consists of two methodological steps prompted by the nature of the data. First, a discrete Cox survival model of transitions to retirement with time-dependent covariates is compared to a Cox model without time-dependent covariates and a survival random forest. Second, the best performing model (Cox with time-dependent covariates) is compared to random forests adapted to time-dependent covariates by means of simulations. The results from the analysis do not clearly favor a single method; whereas machine learning algorithms have a stronger predictive power, the variables they use in their predictions do not necessarily display causal relationships with the outcome variable. Therefore, the two methods should be seen as complements rather than substitutes. In addition, simulations shed a new light on the role of some variables—such as education and health—in retirement decisions. This amounts to both substantive and methodological contributions to the literature on the modeling of retirement.

The Welfare Economics of Reference Dependence

Empirical evidence suggests individuals often evaluate options relative to a reference point, especially seeking to avoid losses. We analyze welfare under reference dependence. We describe how welfare effects of policies depend on normative judgments about whether reference dependence reflects a bias or normative preference. Lowering reference points generally improves welfare, absent countervailing externalities or biases. Conversely, welfare effects of price changes depend strongly on normative judgments. We apply our theory to reference dependence exhibited in German workers' retirement decisions. Our results suggest positive welfare effects of increasing the Normal Retirement Age but ambiguous effects of financial incentives to postpone retirement.

Public Pension Reforms and Retirement Decisions: Narrative Evidence and Aggregate Implications

Public Pension Reforms and Retirement Decisions: Narrative Evidence and Aggregate Implications

Effect of uncertainty visualizations on myopic loss aversion and the equity premium puzzle in retirement investment decisions.

For many households, investing for retirement is one of the most significant decisions and is fraught with uncertainty. In a classic study in behavioral economics, Benartzi and Thaler (1999) found evidence using bar charts that investors exhibit myopic loss aversion in retirement decisions: Investors overly focus on the potential for short-term losses, leading them to invest less in riskier assets and miss out on higher long-term returns. Recently, advances in uncertainty visualizations have shown improvements in decision-making under uncertainty in a variety of tasks. In this paper, we conduct a controlled and incentivized crowdsourced experiment replicating Benartzi and Thaler (1999) and extending it to measure the effect of different uncertainty representations on myopic loss aversion. Consistent with the original study, we find evidence of myopic loss aversion with bar charts and find that participants make better investment decisions with longer evaluation periods. We also find that common uncertainty representations such as interval plots and bar charts achieve the highest mean expected returns while other uncertainty visualizations lead to poorer long-term performance and strong effects on the equity premium. Qualitative feedback further suggests that different uncertainty representations lead to visual reasoning heuristics that can either mitigate or encourage a focus on potential short-term losses. We discuss implications of our results on using uncertainty visualizations for retirement decisions in practice and possible extensions for future work.

Experimental Research on Retirement Decision-Making: Evidence from Reproductions

Experimental Research on Retirement Decision-Making: Evidence from Reproductions

A Two-Person Zero-Sum Game Approach for a Retirement Decision with Borrowing Constraints

A Two-Person Zero-Sum Game Approach for a Retirement Decision with Borrowing Constraints

Coal-Fired Power Plant Retirements in the United States

Executive Summary We summarize the history of US coal-fired plant retirements over the past decade, describe planned future retirements, and forecast the remaining operating life for every operating coal-fired generator at each plant. Nearly one-third of the coal fleet retired during the 2010s and a quarter of the remaining capacity has announced plans to retire. We summarize the technology and location trends that are correlated with the observed retirements. We then describe a theoretical model of the retirement decision coal generator owners face. We use retirements from the past decade to quantify the relationships in the model for retired generators. Our model predicts that three-quarters of coal generation capacity will retire in the next 20 years, with most of that retirement concentrated in the next 5 years. Policy has limited ability to affect retirement times. A $20 per megawatt-hour electricity subsidy extends the average life of a generator by 6 years. A $51 per ton carbon tax brings forward retirement dates by about 2 years. In all scenarios, a handful of electricity generators remain on the grid beyond our forecast horizon.

Gender Wage and Longevity Gaps and the Design of Retirement Systems

We study the design of pension benefits for male and female workers. Women live longer than men but have a lower wage. Individuals can be single or live in couples who pool their incomes. Social welfare is utilitarian but an increasing concave transformation of individuals' lifetime utilities introduces the concern for redistribution between individuals with different life-spans. We derive the optimal direction of redistribution and show how it is affected by a gender neutrality rule. With singles only, a simple utilitarian solution implies redistribution from males to females. When the transformation is sufficiently concave redistribution may or may not be reversed. With couples only, the ranking of gender retirement ages is always reversed when the transformation is sufficiently concave. Under gender neutrality pension schemes must be self-selecting. With singles only this implies distortions of retirement decision and restricts redistribution across genders. With couples, a first best that implies a lower retirement age for females can be implemented by a gender-neutral system. Otherwise, gender neutrality implies equal retirement ages and restricts the possibility to compensate the shorter-lived individuals. Calibrated simulations show that when singles and couples coexist, gender neutrality substantially limits redistribution in favor of single women and fully prevents redistribution in favor of male spouses.

노동 기회의 옵션 가치와 최적 은퇴 결정: 이항 모형을 이용한 접근법

In this paper, we consider the retirement and financial choice problem of an economic agent and solve it by the binomial tree model. In the dual martingale approach we take, the decisions are made by measuring the shadow price of personal wealth. We take an American option-type interpretation of the opportunity to work to evaluate the retirement decision. Different from previous infinite horizon models, here we provide a finite horizon framework where the maturity time can be comparable. We also present comparative static results for the retirement boundary.

Building and Using Data Resources for Research on Job Characteristics, Health, and Retirement

A growing literature seeks to understand the relationship between the experience of work and important later-life outcomes. Rich longitudinal measurement of both sides of this equation in datasets such as the Health and Retirement Study (HRS) have made this research possible. These data take the form of self-reported experiences of work (such as physical demands, job flexibility, job satisfaction etc.). Increasingly, researchers are looking to add potentially complementary information on the work environment available in the Occupational Information Network (O*NET) database through a linkage using occupation and industry codes in the survey data. The session talks will describe research conducted using O*NET linked with HRS data as well as ongoing work to create a new data resource that will allow other researchers to undertake research with O*NET-HRS linked data. Each presentation will include some discussion of both the value and limits of using the linkage to O*NET. Carpenter will provide a detailed description a new project linking the 2019 O*NET data to the HRS for public use.This presentation explains the types of variables that will be made available in the O*NET-HRS occupation project and will provide examples for how the measures can be used in longitudinal HRS studies. Using O*NET-HRS linked data, Carr will present on work examining the role of preretirement job complexity in alternative retirement paths and cognitive performance. Helppie-McFall will used the linked data to discuss the role of mismatch between demands of work and workers’ ability to meet those demands in retirement decisions.

Using HRS-ONET Linked Data to Study Subjective and Objective Mismatch Between Work Demands and Capacity at Older Ages

Mismatch between demands of work and workers’ ability to meet those demands may play an important role in retirement decisions. This presentation extends earlier work using Health and Retirement Study data linked to O*NET to develop measures of discrepancy between individual’s own reports of physical and mental abilities and 1) their perceptions of the physical and mental demands of their jobs and 2) O*NET ratings of the physical and mental demands of their jobs. In particular, we utilize newly available linked information using 2010 Census codes and 2019 O*NET ratings that reflect more current jobs. We then examine the impact of each type of mismatch (subjective and objective) on retirement timing. Overall, we find a stronger connection between subjective mismatch relative to objective mismatch. We discuss implications of this finding in terms of the value of the O*NET linkage and potential interventions aimed at extending working lives for positive aging.

The Role of Occupational Switching on Retirement of American Midlife Workers

As the percentage of older adults with hypertension continues to increase, medication adherence remains low. However, medication adherence can potentially be improved through the use of medication reminder apps. Medication reminder apps contain numerous features that enable older adults to remember to take their medication, such as providing alerts to take their medication, reminding them when to refill their prescription, and more. Despite being aware of these apps, many older adults lack the motivation needed to use them continuously. We recruited 9 participants (60 years or older) who currently take medication for a chronic condition. Using a mixed-methods approach, we gathered quantitative survey data using the TechSAge Demographic Background, Motivation, and Behavior Change Technique Questionnaires). Qualitative data were gathered through a semi-structured interview that asked questions about general motivations and preferences in addition to engaging participants in co-designing a medication adherence app. Results from the interview were analyzed through a thematic analysis that identified comprehension and preferences of older adults in medication reminder app usage. We tested five different intrinsic motivation factors, and results indicate older adults are most motivated intrinsically due to perceived choice, perceived competence, value/usefulness, effort/importance, and pressure/tension. We also tested five factors of extrinsic motivation, and results indicate older adults are most motivated extrinsically due to introjected regulation, reward-driven, external regulation, compliance, and identification. These data provide insights to guide the design of medication reminder apps to support older adults in the self-management of their chronic conditions.

Optimal Retirement Under Partial Information

The optimal retirement decision is an optimal stopping problem when retirement is irreversible. We investigate the optimal consumption, investment, and retirement decisions when the mean return of a risky asset is unobservable and is estimated by filtering from historical prices. To ensure nonnegativity of the consumption rate and the borrowing constraints on the wealth process of the representative agent, we conduct our analysis using a duality approach. We link the dual problem to American option pricing with stochastic volatility and prove that the duality gap is closed. We then apply our theory to a hidden Markov model for regime-switching mean return with Bayesian learning. We fully characterize the existence and uniqueness of variational inequality in the dual optimal stopping problem, as well as the free boundary of the problem. An asymptotic closed-form solution is derived for optimal retirement timing by small-scale perturbation. We discuss the potential applications of the results to other partial-information settings.

Big five personality traits and retirement decisions

AbstractWe estimate the effect of the Big Five personality traits on the retirement decisions of individuals aged between 50 and 80 years in fourteen European countries, using wave 7 from the SHARE data. We investigate the probability of retirement and a measure of the distance between actual retirement and ordinary retirement age. Overall, we find that personality affects retirement decisions, and the effects are similar across gender. Openness to experience, conscientiousness and extraversion are generally associated with a delay in retirement decisions, whereas neuroticism anticipates the exit from the labour market.