Retirement Planning

This report is concerned with two issues. First, it describes when individuals near retirement age plan to retire, and documents how their characteristics differ by planned retirement age. Second, it evaluates how accurately these individuals predict the timing of their retirement, and documents how good planners differ from poor planners. Consistent with earlier studies of retirement expectations, we demonstrate that retirement expectations in the HRS are closely correlated with many of the standard determinants of actual retirement. Broadly speaking, workers who expect to retire before age 62 tend to be wealthy and have generous pensions. Private pension incentives play an important role in determining retirement expectations. Individuals with private pensions are disproportionately represented among individuals expecting to retire early and, conditional on having a private pension, access to early pension benefits greatly increases the odds of planning an early retirement. Private pension wealth declines considerably with expected retirement age further suggesting that individuals are responsive to private pension plan incentives. There is little correlation between Social Security wealth and expected retirement age. There is strong evidence that spouses coordinate their retirement plans. The simple correlation between the expected retirement ages of husbands and wives is 0.43. Perhaps somewhat surprisingly, though, only 14 percent of couples expect the husband and wife to retire in the same year. In 50 percent of cases, husbands report that they expect to retire after their wives retire.

RDA 2000-010 Panis

Pension Wealth/Retirement Planning

9882