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, such as the rise in net worth due to higher asset returns, the labor market's deterioration due to higher unemployment risk, the expansion of fiscal support programs, and increased mortality risk. We quantitatively study the interaction of these factors and decompose their relative contribution to the recent rise in retirements using an incomplete markets, overlapping generations model with a frictional labor market. We find that all of these channels contribute to excess retirements, with labor market conditions being a more important driver in 2020-2021 and fiscal programs playing a larger role in 2022-2023. We show that our model's predictions on aggregate labor market moments and cross-sectional moments on retirement patterns across the wealth distribution 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: 45 pages
Date: 2024-07, Revised 2024-07
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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