|Title||The Role of Conventional Retirement Age in Retirement Decisions|
|Year of Publication||2006|
|Institution||The University of Michigan, Michigan Retirement Research Center|
|Keywords||Health Conditions and Status, Retirement Planning and Satisfaction|
Existing research on retirement behavior tends to ignore conventional or focal or usual retirement ages in the model and estimation, and then ask whether a model which takes no direct account of such conventions can account for the observed spikes in the retirement hazard at age 62 and 65. This paper, in contrast, focuses on a direct measure of usual retirement age, based on a question that has been included in each wave of the Health and Retirement Study HRS). Using actual survey responses has several advantages: it identifies respondents who say that there is no usual retirement age for workers like them; it distinguishes between those who regard 62 and those who regard 65 as the relevant age; and it identifies the not insignificant number of workers for whom the usual age is neither 62 nor 65. There is little evidence that workers regard 63, the age at which COBRA coverage could provide a bridge to Medicare eligibility, as conventional, or that those affected by the increase in the age of eligibility for full retirement benefits under Social Security have adopted 66 or 67 as a focal retirement age. Following Wave I HRS respondents for six additional waves (12 years) so that their actual retirement can be observed shows that the actual retirement hazard is substantially higher at (and around) the age that workers identified in Wave I as the usual retirement age for workers like them. This is true even when we control for actual age at each wave, and for baseline values of earnings, wealth, health, and marital status. The finding that workers are more likely to retire at a particular age if they regard that age as the usual retirement age for workers like them suggests that the direct measures of the usual age may be useful in more formal models of the retirement process. In a world where some workers understand the incentives they face and respond appropriately, but others are poorly informed and overwhelmed by the choices they face, the usual retirement age may be a starting point for modeling the behavior of the latter group of workers.
|Endnote Keywords|| |
Retirement Behavior/Age Factors
|Endnote ID|| |