Using Health and Retirement Study (HRS) data, this paper examines how changes in individual workers’ past and present pension coverage, retirement incentives in Social Security, and retiree health insurance have contributed to retirement decisions for the 1931-1953 birth cohorts. It then uses these findings to project retirement behavior for the 1955-1987 cohorts in the Survey of Income and Program Participation (SIPP). A key assumption is that younger cohorts will have no defined benefit (DB) pensions or retiree health coverage in their future jobs. A key limitation is the assumption of a stable relationship in each successive cohort between each factor and labor market decisions.
The paper found that:
- The decrease in DB pension coverage from previous jobs and the decline in retiree health coverage between the HRS and SIPP cohorts each push the retirement age up by approximately one year, all else equal.
- The one-year increase in Social Security’s Full Retirement Age is associated with a 0.3-year increase in the retirement age, all else equal.
- After accounting for other differences between the HRS and SIPP cohorts, the average retirement age is projected to rise by one year over the next three decades, from age 61.8 to 62.8.
The policy implications of the findings are:
- We anticipate that changes in pensions, retiree health benefits, and Social Security that are already in motion will continue to increase, albeit slightly, the average retirement age.
- Nonetheless, policies aimed at extending retirement ages may still be necessary, given that a one-year retirement age increase is likely to be insufficient to permit future cohorts to achieve a sufficient standard of living.