To What Extent Does SES Status Lead People to Retire Too Soon?



Working longer is a powerful lever to enhance retirement security.  Individuals should be able to extend the number of years they work because, on average, they are healthier, live longer, and face less physically demanding jobs.  But averages are misleading when discrepancies in health, job prospects, and life expectancy have widened between individuals with low and high socioeconomic status (SES).  To understand the extent of disparities across SES groups, this paper uses data from the Health and Retirement Study (HRS) to identify the retirement gap – the difference between how much longer each household would need to work to maintain their pre-retirement standard of living and their planned retirement age.  The analysis shows that households in lower-SES quartiles have larger retirement gaps than their higher-SES counterparts, even after controlling for household characteristics and late-career shocks.  This same group has seen little improvement in health and life expectancy and faces poor job prospects.  In short, retirement shortfalls for the most vulnerable may not be able to be bridged by working longer, and other solutions will be needed.