Dissecting the Great Retirement Boom

Serdar Birinci, Miguel Faria-e-Castro and Kurt See

No 2024-017, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Between 2020 and 2023, the fraction of retirees in the working-age population in the U.S. increased above its pre-pandemic trend. Several explanations have been proposed to rationalize this gap, including increases in net worth, the deterioration of the labor market with higher job separations, the expansion of fiscal transfer programs, and higher mortality risk. We develop an incomplete markets, overlapping generations model with a frictional labor market to quantitatively study the interaction of these factors and decompose their contributions to the rise in retirements. We find that new retirements were concentrated at the bottom of the income distribution, and the most important factors driving the rise in retirements were higher job separations and the expansion of fiscal transfers. We show that our model’s predictions on aggregate labor market moments and cross-sectional moments on retirement patterns across income and wealth distributions are in line with the data.

Keywords: retirement; labor supply; labor flows; financial markets (search for similar items in EconPapers)
JEL-codes: E24 G11 J21 J22 J26 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024-07, Revised 2025-03-21
New Economics Papers: this item is included in nep-age, nep-dge and nep-lma
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DOI: 10.20955/wp.2024.017

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