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

Dongwoo Kim

Journal of Economic Behavior & Organization, 2020, vol. 173, issue C, 365-385

Abstract: 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.

Keywords: Retirement behavior; Behavioral finance; Pension (search for similar items in EconPapers)
JEL-codes: G41 H55 J26 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:173:y:2020:i:c:p:365-385

DOI: 10.1016/j.jebo.2019.10.016

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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