85th International Atlantic Economic Conference

March 14 - 17, 2018 | London, United Kingdom

Early retirement in the United States: Resisting the trend

Thursday, 15 March 2018: 9:30 AM
Joseph S. Falzone, Ph.D. , Economics, Peirce College, Philadelphia, PA
The objective of this paper is to investigate the early retirement decisions of older men in the United States. Analysis of the decision to retire early can shed light on a trend that has important implications on gross domestic product (GDP) growth as well as on government budget. By focusing on the decision to retire before the full retirement age mandated by Social Security, an analysis of the decision to retire early may help to better understand whether the decision to retire early is voluntary or involuntary, the latter of which may be addressed by public policy.

Retirement is a relatively new concept in the lives of workers. Until the 20th century, most individuals worked until physical constraints or death ended their working lives. By the middle of the century, the majority of men retired by the age of 65, due in large part to rules regarding Social Security. The decision to retire early counters the trend of men continuing to work beyond full retirement age that began in 1990’s when the percentage of older workers remaining in the labor force began to rise.

I utilize family data files from the Panel Study of Income Dynamics, 2015 Main Family Data. The sample consists of approximately 9,000 men between the ages of 40 and 65 years, of whom 10 percent retired early. I hypothesize that the decision to retire early, defined as retirement before Full Retirement Age mandated by Social Security, can be explained by qualitative changes in the nature of work, by socio-demographic, physical and mental demands, cyclical changes, public policy, and by changes in wealth. Employing a probit model, I estimate the probability of early retirement for the sample.

I anticipate that the decision to retire early is a function of the individual’s health, expected post retirement income stream, as well as cyclical and structural factors. Most notably I anticipate that the individual health and anticipated income stream play the most significant role in the decision to retire early.