Projecting Behavioral Responses to the Next Generation of Retirement Policies

Alan Gustman () and Thomas Steinmeier

No 12958, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines retirement and related behavioral responses to policies that on average are actuarially neutral. Many conventional models predict that actuarially neutral policies will not affect retirement behavior. In contrast, our model allows those with high time preference rates to find that the promise of an actuarially fair increase in future rewards does not balance the loss from foregone current benefits. Using data from the Health and Retirement Study, we find that from age 62 through full retirement age, the earnings test reduces full-time work by married men by about four percentage points, or by about ten percent of married men at full-time work. Abolishing the requirements on many jobs that an individual work full-time or not at all, what we term a minimum hours constraint on employment, would induce more than twice as many people to enter partial retirement as would leave full-time work, so that total full-time equivalent (FTE) employment would increase, although by a modest amount. If all benefits from personal accounts could be taken as a lump sum, the fraction not retired at age 62 would fall by about 5 percentage points compared to a system where there is mandatory annuitization of benefits.

JEL-codes: D31 D91 E21 H55 I3 J08 J14 J26 J32 J38 (search for similar items in EconPapers)
Date: 2007-03
New Economics Papers: this item is included in nep-lab, nep-mac and nep-pbe
Note: AG LS PE
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Citations: View citations in EconPapers (8)

Published as Alan L. Gustman and Thomas L. Steinmeier. "Projecting Behavioral Responses to the Next Generation of Retirement Policies". Research in Labor Economics, Vol. 28, 2008, pp. 141-196.

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Chapter: Projecting behavioral responses to the next generation of retirement policies (2008)
Working Paper: Projecting Behavioral Responses to the Next Generation of Retirement Policies (2007)
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