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==Factors affecting retirement decisions== [[File:A message on the information board at Manchester Piccadilly train station wishing their colleague a happy retirement.jpg|thumb|A message on an information board at [[Manchester Piccadilly station]], [[England]] wishing a member of staff a happy retirement after 52 years of service]] Many factors affect people's retirement decisions. Retirement funding education is a big factor that affects the success of an individual's retirement experience. Social Security plays an important role because most individuals solely rely on Social Security as their only retirement option, when Social Security's trust funds are expected to be depleted by 2034.<ref>{{Cite web|url=https://www.ssa.gov/oact/TRSUM/|title=A SUMMARY OF THE 2021 ANNUAL REPORTS|website=www.ssa.gov|access-date=28 March 2022}}</ref> Knowledge affects an individual's retirement decisions by simply finding more reliable retirement options such as Individual Retirement Accounts or Employer-Sponsored Plans. In countries around the world, people are much more likely to retire at the early and normal retirement ages of the public pension system (e.g., ages 62 and 65 in the U.S.).<ref>Gruber, Jonathan and David Wise, eds. (1999). ''Social Security and Retirement around the World.'' University of Chicago Press.</ref> This pattern cannot be explained by different financial incentives to retire at these ages since typically retirement benefits at these ages are approximately actuarially fair; that is, the present value of lifetime pension benefits (pension wealth) conditional on retiring at age ''a'' is approximately the same as pension wealth conditional on retiring one year later at age ''a''+1.<ref>Gustman, Alan and Thomas Steinmeier (2003). "Retirement Effects of Proposals by the President's Commission to Strengthen Social Security." NBER Working Paper No. 10030</ref> Nevertheless, a large literature has found that individuals respond significantly to financial incentives relating to retirement (e.g., to discontinuities stemming from the [[Earnings test (US)|Social Security earnings test]] or the tax system).<ref>Feldstein, Martin and Jeffrey B. Liebman (2002). "Social Security," in ''Handbook of Public Economics'', Vol. 4, Elsevier Press</ref><ref>Friedberg, Leora (2000). "The Labor Supply Effects of the Social Security Earnings Test." ''Review of Economics and Statistics,'' Vol. 82, No. 1, pp. 48–63</ref><ref>Liebman, Jeffrey B., Erzo F.P. Luttmer and David G. Seif (2008). "Labor Supply Responses to Marginal Social Security Benefits: Evidence from Discontinuities." NBER Working Paper No. 14540</ref> Greater wealth tends to lead to earlier retirement since wealthier individuals can essentially "purchase" additional leisure. Generally, the effect of wealth on retirement is difficult to estimate empirically since observing greater wealth at older ages may be the result of increased saving over the working life in anticipation of earlier retirement. However, many economists have found creative ways to estimate wealth effects on retirement and typically find that they are small. For example, one paper exploits the receipt of an inheritance to measure the effect of wealth shocks on retirement using data from the HRS.<ref>Brown, Jeffrey R., Courtney Coile and Scott J. Weisbenner (2006). "The Effect of Inheritance Receipt on Retirement." NBER Working Paper No. 12386</ref> The authors find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period. A great deal of attention has surrounded how the [[2008 financial crisis]] and subsequent [[Great Recession]] are affecting retirement decisions, with the conventional wisdom saying that fewer people will retire since their savings have been depleted; however recent research suggests that the opposite may happen. Using data from the HRS, researchers examined trends in defined benefit (DB) vs. defined contribution (DC) pension plans and found that those nearing retirement had only limited exposure to the recent stock market decline and thus are not likely to substantially delay their retirement.<ref>{{cite conference|url=http://www.nber.org/2009rrc/1.2%20Gustman,%20Steinmeier,%20Tabatabai-revised.pdf|last1=Gustman|first1=Alan|first2=Thomas|last2=Steinmeier|first3=Jahid|last3=Tabatabai|title=How Do Pension Changes Affect Retirement Preparedness? The Trend to Defined Contribution Plans and the Vulnerability of the Retirement Age Population to the Stock Market Decline of 2008–2009|conference=11th Annual Joint Conference of the Retirement Research Consortium|date=August 10–11, 2009|publisher=National Press Club|location=Washington, DC}}</ref> At the same time, using data from the Current Population Survey (CPS), another study estimates that mass layoffs are likely to lead to an increase in retirement almost 50% larger than the decrease brought about by the stock market crash, so that on net retirements are likely to increase in response to the crisis.<ref>Coile, Courtney B. and Phillip B. Levine (2009). "The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement," presented at NBER Summer Institute Workshop on Aging, 21–25 July 2009.</ref> More information tells of how many who retire will continue to work, but not in the career they have had for the majority of their life. Job openings will increase in the next 5 years due to retirements of the baby boomer generation. The Over 50 population is actually the fastest growing labor groups in the US. A great deal of research has examined the effects of health status and health shocks on retirement. It is widely found that individuals in poor health generally retire earlier than those in better health. This does not necessarily imply that poor health status leads people to retire earlier, since in surveys retirees may be more likely to exaggerate their poor health status to justify their earlier decision to retire. This justification bias, however, is likely to be small.<ref>Dwyer, Debra and Olivia Mitchell (1999). "Health problems as determinants of retirement: Are self-rated measures endogenous?" ''Journal of Health Economics'', Vol. 18, No. 2, pp. 173–193</ref> In general, declining health over time, as well as the onset of new health conditions, have been found to be positively related to earlier retirement.<ref>Dwyer, Debra and Jianting Hu (2000). "Retirement Expectations and Realizations: the Role of Health Shocks and Economic Factors," in ''Forecasting Retirement Needs and Retirement Wealth'', Mitchell, Olivia, P. Brett Hammond and Anna Rappaport, eds.</ref> Health conditions that can cause someone to retire include [[hypertension]], [[diabetes mellitus]], [[sleep apnea]], [[joint diseases]], and [[hyperlipidemia]].<ref>{{Cite web|url = http://www.medscape.com/viewarticle/741559|title = When It Comes to Work, How Old Is Too Old?|date = 3 May 2011|website = NIOSH: Workplace Safety and Health|publisher = Medscape and NIOSH|last = Chosewood|first = L. Casey}}</ref> Most people are married when they reach retirement age; thus, spouse's employment status may affect one's decision to retire. On average, husbands are three years older than their wives in the U.S., and spouses often coordinate their retirement decisions. Thus, men are more likely to retire if their wives are also retired than if they are still in the labor force, and vice versa.<ref>Blau, David M. (1998). "Labor Force Dynamics of Older Married Couples." ''Journal of Labor Economics'', Vol. 16, No. 3, pp. 595–629</ref><ref>Gustman, Alan and Thomas Steinmeier (2000). "Retirement in Dual Career Families: A Structural Model." ''Journal of Labor Economics'', Vol. 18, No. 3, pp. 503–545</ref> === EU member states === Researchers analyzed factors affecting retirement decisions in [[EU member states]]: * Alba-Ramirez (1997) uses micro data from the [[Active Population Survey of Spain]] and [[logit model]] for analyzing determinants of retirement decision and finds that having more members in the household, and as well as children, has a negative effect on the probability of retirement among older males. This is an intuitive result as males in bigger household with children have to earn more and pension benefits will be less than needed for household.<ref>Alba-Ramirez, A. 1997, "Labor Force Participation and Transitions of Older Workers in Spain", Universidad Carlos III de Madrid, Working Paper 97-39, Economic series 17, May.</ref> * Antolin and Scarpetta (1998) using [[German Socio-Economic Panel]] and hazard model find that Socio-demographic factors such as health and gender have a strong impact on the retirement decision: women tend to retire earlier than men, and poor health makes people go into retirement, particularly in the case of [[disability]] retirement. The relationship between health status and retirement is significant for both self-assessed and objective indicators of health status.<ref name="auto">Antolín, P. and S. Scarpetta. 1998. "Microeconometric Analysis of the Retirement Decision: Germany”, OECD Economics Department Working Papers, No. 204, OECD Publishing</ref> This is similar finding to the previous research of Blau and Riphahn (1997); using individual data from the German Socio-Economic Panel as well, but controlling for different variables they found that if individual has chronic health condition, then he tends to retire.<ref>Blau, D. and R. Riphahn. 1997. “Labor Force Transitions of Older Married Couples in Germany”. Paper presented at International Health and Retirement Surveys Conference, Amsterdam, August.</ref> Antolin and Scarpetta (1998) use better measure for health status than Blau and Riphahn (1997), because self-assessed and objective indicators of health status are better measures than chronic health condition.<ref name="auto"/> * Blöndal and Scarpetta (1999) find significant effect of socio-demographic factors on the retirement decision. Men tend to retire later than women as women try to benefit from special early retirement schemes in Germany and the Netherlands. Another reason is that they get access to pensions earlier than men as standard age of entitlement to pension is lower for women compared with men in Italy and the United Kingdom. The other interesting finding is that retirement depends on household size: heads of large households prefer not to retire. They think that this can be because of the significance of wages in large households compared with smaller ones and insufficiency of pension benefits. Another finding is that health status is significant factor in all early retirements; poor health conditions are especially significant if respondents join to disability benefit scheme. This result is true for both indicators used to express health status (self assessment and objective indicators).<ref>Blöndal, S. and S. Scarpetta. 1997. Early retirement in OECD countries: The Role of Social Security Systems, OECD Economic Studies, issue 29, pages 7–54</ref> This research is similar to Antolin and Scarpetta (1998) and shows similar results extending sample and implications from Germany to OECD. * Murray et al. (2016, 2019) have shown that in the United Kingdom local labour markets of where workers live effects later life work exit.<ref name=":0">{{Cite journal|last1=Murray|first1=Emily T.|last2=Head|first2=Jenny|last3=Shelton|first3=Nicola|last4=Hagger-Johnson|first4=Gareth|last5=Stansfeld|first5=Stephen|last6=Zaninotto|first6=Paola|last7=Stafford|first7=Mai|date=June 2016|title=Local area unemployment, individual health and workforce exit: ONS Longitudinal Study|journal=The European Journal of Public Health|volume=26|issue=3|pages=463–469|doi=10.1093/eurpub/ckw005|issn=1101-1262|pmc=4884329|pmid=26922299}}</ref><ref name=":1">{{Cite journal|last1=Murray|first1=Emily T.|last2=Zaninotto|first2=Paola|last3=Fleischmann|first3=Maria|last4=Stafford|first4=Mai|last5=Carr|first5=Ewan|last6=Shelton|first6=Nicola|last7=Stansfeld|first7=Stephen|last8=Kuh|first8=Diana|last9=Head|first9=Jenny|date=April 2019|title=Linking local labour market conditions across the life course to retirement age: Pathways of health, employment status, occupational class and educational achievement, using 60 years of the 1946 British Birth Cohort|journal=Social Science & Medicine|volume=226|pages=113–122|doi=10.1016/j.socscimed.2019.02.038|pmid=30852391|s2cid=73725800|url=https://discovery.ucl.ac.uk/id/eprint/10069556/7/Kuh%20VoR1-s2.0-S027795361930111X-main.pdf}}</ref> In the first study, older workers aged 50 to 75 were more likely to exit the workforce over 10 years (years 2011–2011) if they had lived in a more deprived local authority in 2001. For respondents that identified as sick/disabled in 2011, effects of local area unemployment in 2001 were stronger for respondents who had better self-rated health in 2001.<ref name=":0" /> The second study used the 1946 Birth Cohort to show that it's not just area unemployment near retirement age that matters for the ages workers retire: higher area unemployment at age 26 was associated with poorer health and lower likelihood of employment at aged 53; and these two individual pathways were identified as the key mediators between area unemployment and retirement age.<ref name=":1" /> * Rashad Mehbaliyev (2011)<ref>{{cite thesis |url=http://www.etd.ceu.hu/2011/mehbaliyev_rashad.pdf |first=Rashad |last=Mehbaliyev |date=2009 |title=Determinants of retirement status: Comparative evidence from old and new EU member states |type=Masters |publisher=Central European University |location=Budapest}}</ref> analyzed how different factors related with health, demographics, behavior, financial status, and macroeconomics can affect retirement status in European Union countries for data collected from the SHARE Wave 2 dataset ([[Survey of Health, Ageing and Retirement in Europe]])<ref>{{cite web|url=http://www.share-project.org/publications/other.html|title=The Survey of Health, Ageing and Retirement in Europe (SHARE): Other|last=SHARE|work=share-project.org|url-status=dead|archive-url=https://web.archive.org/web/20170118064225/http://www.share-project.org/publications/other.html|archive-date=18 January 2017|access-date=16 January 2017}}</ref> and UN sources. He found that males are less likely to be retired compared with females in [[New Member States]], which is the opposite result than he found for [[Old Member States]].<ref>{{Cite book|url=https://www.morebooks.de/store/gb/book/determinants-of-retirement-status/isbn/978-3-8484-0780-4|title=Determinants of Retirement Status|last=Mehbaliyev|first=Rashad|date=14 February 2012|publisher=LAP LAMBERT Academic Publishing|isbn=9783848407804|via=www.morebooks.de}}</ref> He explained that:<ref>{{Cite web|url=https://www.buecher.de/shop/englische-buecher/determinants-of-retirement-status/mehbaliyev-rashad/products_products/detail/prod_id/35034068/|title=Determinants of Retirement Status|last=Production|first=bücher de IT and|website=www.buecher.de}}</ref> "The reasons for these results can be the facts that significant [[gender wage gap]] exists in New Member States,<ref>{{cite web|url=http://www.libreriauniversitaria.it/determinants-retirement-status-mehbaliyev-rashad/buch/9783848407804|title=Determinants of Retirement Status|work=libreriauniversitaria.it|access-date=16 January 2017}}</ref> household sizes are bigger in these countries than in Old Member States<ref>{{cite web|url=http://www.lawbooks.com.au/book/determinants-of-retirement-status.do|title=Personal Loans- Law Books|work=lawbooks.com.au|url-status=dead|archive-url=https://web.archive.org/web/20130627021822/http://www.lawbooks.com.au/book/determinants-of-retirement-status.do|archive-date=27 June 2013|access-date=16 January 2017}}</ref> and males play important role in household income which make them retire less than females."<ref>{{Cite book|title=Determinants of Retirement Status: Comparative Evidence from Old and New EU Member States|last=Mehbaliyev|first=Rashad|date=14 February 2012|publisher=LAP LAMBERT Academic Publishing|isbn=978-3848407804}}</ref> === United States === [[File:20200101 Life expectancy increases with age already achieved - chart.svg|thumb|Life expectancy in the U.S.<ref name=SocSecPeriodLifeExpectancy_2020/> substantially exceeds the average retirement age. Those retiring in their sixties are projected to live into their eighties; further, life expectancy increases as one ages.]] * Quinn et al. (1998) find significant correlation between health status and retirement status. They transform answers for question about health status from five levels ("excellent", "very good", "good", "fair" and "poor") into three levels and report results for three groups of people. 85% of respondents who answered "excellent" or "very good" to the question about their health in 1992 were still working two years after this interview, compared to 82% of those who answered "good", and 70% of those answered "fair" or "poor". This fact is also true for year 1996: 73% of people from the first group were still on the job market, while this is 66% and 55% for other groups of people.<ref>Quinn, J., R. Burkhauser, K. Cahill and R. Weather. 1998. "Microeconometric Analysis of the Retirement Decision: The United States”, OECD Economics Department Working Paper No. 203</ref> However, Dhaval, Rashad and Spasojevic (2006) using data from six waves of [[Health and Retirement Survey]] (HRS) show that relationship between retirement and health status can imply the opposite effect in reality: physical and mental health decline after retirement.<ref>Dhaval, D., I. Rashad, and J. Spasojevic. 2006. “The Effects of Retirement on Physical and Mental Health Outcomes”, NBER Working Paper w12123</ref> * Benitez-Silva (2000) analyzes determinants of labor force status and retirement process among elderly US citizens and possibility of decision returning to work using [[logit]] and [[probit]] models. He uses Health and Retirement Survey (HRS) for this purpose and finds that physical and mental health has significant effect on becoming employed. Male respondents are more likely to change their status from being not-employed to employed, but being insured has a negative effect on switching job status from “not-employed" to "employed" for people aged 60–62 and insignificant effect for 55–59 and aged over 63.<ref>Benitez-Silva, H. 2000. "Micro Determinants of Labor Force Status Among Older Americans", SUNY-Stony Brook Department of Economics Working Papers 00-07</ref>
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