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entitled 'Retirement Decisions: Federal Policies Offer Mixed Signals
about When to Retire' which was released on July 11, 2007.
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2007:
Retirement Decisions:
Federal Policies Offer Mixed Signals about When to Retire:
GAO-07-753:
GAO Highlights:
Highlights of GAO-07-753, a report to congressional committees
Why GAO Did This Study:
While many factors influence workers’ decisions to retire, Social
Security, Medicare, and pension laws also play a role, offering
incentives to retire earlier and later. Identifying these incentives
and how workers respond can help policy makers address the demographic
challenges facing the nation.
GAO assessed (1) the incentives federal policies provide about when to
retire, (2) recent retirement patterns and whether there is evidence
that changes in Social Security requirements have resulted in later
retirements, and (3) whether tax-favored private retiree health
insurance and pension benefits influence when people retire. GAO
analyzed retirement age laws and SSA data and conducted statistical
analysis of Health and Retirement Study data. Under the Comptroller
General’s authority, GAO has prepared this report on its own
initiative.
What GAO Found:
Federal policies offer incentives to retire both earlier and later than
Social Security’s full retirement age depending on a worker’s
circumstances. The availability of reduced Social Security benefits at
age 62 provides an incentive to retire well before the program’s age
requirement for full retirement benefits; however, the gradual increase
in this age from 65 to 67 provides an incentive to wait in order to
secure full benefits. The elimination of the Social Security earnings
test in 2000 for those at or above their full retirement age also
provides an incentive to work. Medicare’s eligibility age of 65
continues to provide a strong incentive for those without retiree
health insurance to wait until then to retire, but it can also be an
incentive to retire before the full retirement age. Meanwhile, federal
tax policy creates incentives to retire earlier, albeit indirectly, by
setting broad parameters for the ages at which retirement funds can be
withdrawn from pensions without tax penalties.
Nearly half of workers report being fully retired before turning age 63
and start drawing Social Security benefits at the earliest
opportunity—age 62. Early evidence, however, suggests small changes in
this pattern. Traditionally, some workers started benefits when they
reached age 65. Recently, workers with full retirement ages after they
turned 65 waited until those ages to start benefits. Also, following
the elimination of the earnings test, some indications are emerging of
increased workforce participation among people at or above full
retirement age.
GAO’s analysis indicates that retiree health insurance and pension
plans are strongly associated with when workers retire. After
controlling for other influences such as income, GAO found that those
with retiree health insurance were substantially more likely to retire
before the Medicare eligibility age of 65 than those without. GAO also
found that men with defined benefit plans were more likely to retire
early (before age 62) than those without, and men and women with
defined contribution plans were less likely to do so.
Figure: Federal Retirement Age-Related Rules:
[See PDF for Image]
Source: GAO (analysis); Art Explosion (images).
[End of figure]
What GAO Recommends:
Congress may wish to consider changes to law, programs, and policies
that support retirement security, including retirement ages, in order
to provide a set of signals that work in tandem to encourage work at
older ages.
GAO received comments from HHS, and technical comments from SSA and the
departments of Labor and the Treasury, which were incorporated where
appropriate.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-753].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barbara Bovbjerg at (202)
512-7215 or bovbjergb@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Federal Policies Provide Incentives for both Early and Late Retirement:
Half of Workers Retire Well before Their Full Retirement Age, Although
Early Evidence Points to Some Changes Following Recent Implementation
of Social Security Policies:
Tax-Favored Private Retiree Health Insurance and Pension Plans May
Influence Retirement Patterns:
Conclusions:
Matter for Congressional Consideration:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Logistic Regression Analysis of Factors Associated with
Workers' Retirement Timing:
Appendix III: Prior Studies on the Social Security Earnings Test:
Appendix IV: Demographic Characteristics of Workers with Access to
Retiree Health Insurance and DB and DC Pensions:
Appendix V: Comments from Department of Health and Human Services:
Appendix VI: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: A Delay in Retirement Can Result in Lower Lifetime Benefits
from a DB Pension, Analysis of a Hypothetical Case:
Table 2: A Delay in Retirement Can Result in Higher Lifetime Benefits
from a DC Pension, Analysis of a Hypothetical Case:
Table 3: Early Evidence That Some Workers Are Delaying the Start of
Social Security Retired Worker Benefits:
Table 4: Definitions of Retirement:
Table 5: Selection of Samples for Analysis of Health and Retirement
Study Respondents:
Table 6: Descriptive Statistics for Our Different Samples:
Table 7: Numbers and Percentages of Men and Women in Different
Categories of the Variables Used in Analyses of Full Retirement Timing:
Table 8: Full Retirement Status at Age 62, by Marital Status and Race/
Ethnicity, among Men:
Table 9: Odds Ratios and 95 Percent Confidence Intervals Indicating the
Gross (Bivariate) Associations between Various Factors and Full
Retirement before Age 62 and Age 65, for Men and Women:
Table 10: Adjusted Odds Ratios and 95 Percent Confidence Intervals
Indicating the Net (Multivariate) Associations between Various Factors
and Full Retirement before Age 62 and Age 65, for Men and Women:
Figures:
Figure 1: U.S. Elderly Population is Rising Compared to the Working-Age
Population:
Figure 2: Average Effective Retirement Ages, 1960 to 2006:
Figure 3: Federal Retirement Age-Related Rules:
Figure 4: Lifetime Social Security Retired Worker Benefits are Higher
if a Worker Starts Benefits Later and Lives Past His or Her Break-Even
Age, Analysis of a Hypothetical Case:
Figure 5: Retirement Pattern among Workers Born from 1931 to 1941:
Figure 6: People Typically Begin Drawing Retired Worker Social Security
Benefits at Age 62 or at Full Retirement Age:
Figure 7: Estimated Percent of Respondents with Retiree Health
Insurance by Education, Income Groups, and Race/Ethnicity:
Figure 8: Estimated Percent of Respondents with DB Pensions by
Education Level, Income Groups, and Race/Ethnicity:
Figure 9: Estimated Percent of Respondents with DC Pensions by
Education Level, Income Groups, and Race/Ethnicity:
Abbreviations:
BEPUF: Benefit and Earning Public Use File:
CPS: Current Population Survey:
DB: defined benefit:
DC: defined contribution:
EBRI: Employee Benefit Research Institute:
ERISA: Employee Retirement Income Security Act:
HRS: Health and Retirement Study:
IRA: individual retirement account:
NBDS: New Beneficiary Data System:
PBGC: Pension Benefit Guarantee Corporation:
SSA: Social Security Administration:
United States Government Accountability Office:
Washington, DC 20548:
July 11, 2007:
Congressional Committees:
The first wave of the 78 million member baby boom generation is now
reaching retirement age. The number of people age 62, the earliest age
of eligibility for Social Security retired worker benefits, is expected
to be 21 percent higher in 2009 than in 2008. In addition, by 2030, the
number of workers supporting each retiree is projected to be 2.2, down
from 3.3 in 2006. This demographic shift poses challenges to the
economy, federal tax revenues, the nation's old-age programs, and
individuals' financial security in retirement. For those who are able
to work longer, later retirement can strengthen the economy and also
retiree incomes by postponing the time at which people will start
drawing retirement benefits rather than working. A wide range of
factors including the features of employers' benefit plans, personal
finances, social norms, health, and individual attitudes influence
workers' decisions about when to retire. Federal policies may also play
a role: these include Social Security, Medicare, and tax policies
related to certain private retiree health and defined benefit (DB) and
defined contribution (DC) pension plans.[Footnote 1] Identifying both
the incentives posed by these policies and the extent to which workers
respond to them can help to inform policy makers as they consider ways
to address the demographic challenges facing the nation.
To determine the extent to which federal policies--directly and
indirectly --pose incentives and are influencing individuals' decisions
about the age at which they retire, we have pursued the following
questions: (1) What incentives do federal policies provide about when
to retire? (2) What are the recent retirement patterns, and is there
evidence that recent changes in Social Security requirements have
resulted in later retirements? (3) Is there evidence that tax-favored
private retiree health insurance and pension benefits have influenced
when people retire?
We have prepared this report under the Comptroller General's authority
to conduct evaluations on his own initiative as part of a continued
effort to provide Congress with relevant information on the aging of
the American workforce.
To identify which federal policies may influence the age at which
workers retire, we reviewed the relevant literature and interviewed
agency experts. To answer our second and third objectives, we used two
main data sources: (1) Social Security Administration (SSA) data and
(2) longitudinal data from the Health and Retirement Study (HRS)
conducted by the University of Michigan, which looks at the
circumstances under which recent retirees or people who are approaching
retirement are making their decisions to retire. We used the SSA data
to determine when workers who reached ages 66 through 71 in 2006
started drawing Social Security retired worker benefits. We conducted
various statistical analyses of the HRS survey data to determine which
factors were associated with decisions to retire at early ages (before
age 62) and decisions to retire at later ages (at or after age 65). We
focused on workers who were born from 1931 to 1941 (reaching age 62 at
some point between 1993 and 2003) and who were in the labor force when
the HRS survey began in 1992. To select appropriate variables to
consider in our analyses, we reviewed relevant literature and
interviewed experts in the field. We conducted reliability assessments
of these data and found them to be sufficiently reliable for our study.
As is the case with most statistical analyses, our work is limited by
factors such as the unavailability of information and the inability to
account for influences that cannot be quantified or observed. In
addition, our analysis of the HRS survey, which includes only one
cohort of workers, may not apply to older or younger groups of workers.
In different parts of our analysis we considered workers to be retired
based on four different definitions:
˛ Reported retirement: Workers who described themselves as completely
retired in response to HRS interviews.
˛ Full retirement: Workers who described themselves as fully retired in
response to HRS interviews and who were no longer working for pay.
˛ Partial retirement: Workers who described themselves as retired in
response to HRS interviews who were working part-time or for a portion
of the year.
˛ Social Security retirement: Workers who received Social Security
retired worker benefits as indicated in Social Security administrative
data.
These definitions can be used to examine different aspects of
retirement whether it be the decision to leave the workforce or the
decision to start drawing Social Security benefits. These definitions
are not mutually exclusive. For further discussion of these definitions
of retirement and details concerning our scope and methodology, see
appendix I. We conducted our work between July 2006 and June 2007 in
accordance with generally accepted government auditing standards.
Results in Brief:
Federal policies offer incentives to retire at different ages depending
on a worker's circumstances. The availability of reduced Social
Security benefits at age 62 provides an incentive to retire well before
the full retirement age, particularly for those in poor health or with
short life expectancies. However, the incremental rise in the Social
Security full retirement age from 65 to 67 makes it more costly for
future cohorts to draw benefits early because of the progressively
higher reductions in benefits. This increase in full retirement age
gives workers born after 1937 a greater incentive to remain in the
workforce longer in order to secure full benefits. The elimination in
2000 of the Social Security earnings test for those at or above full
retirement age also provides an incentive (or removes a disincentive)
to continue working. With regard to Medicare, the age 65 eligibility
requirement for nearly all workers is a strong incentive for those
without retiree health insurance to wait until then to retire, since
most have only expensive alternatives in the form of extended employer
coverage or individual policies. On the other hand, Medicare's
availability at 65 can be an incentive to retire before the rising full
retirement age. Meanwhile, federal tax policy creates incentives to
retire earlier, albeit indirectly, by setting broad parameters for the
ages at which retirement funds can be withdrawn without penalty from
employer-sponsored pension plans. For example tax laws generally allow
workers to begin withdrawing funds from individual retirement accounts
(IRAs) and pension plans starting at age 59 ˝ without penalty or
earlier under certain circumstances. Withdrawals must generally begin
by about age 70 ˝. Additionally, the Employee Retirement Income
Security Act (ERISA) allows employer-sponsored, DB pension plans to set
earlier eligibility ages without tax penalties. Many of these plans
allow workers to retire with reduced benefits at age 55.
Considering how these incentives affect retirement behavior, we found
that nearly half of all workers fully retire by the time they reach age
63, but early evidence suggests that alterations in Social Security
policy may be fostering some later retirements. Despite Social
Security's full retirement age of 65 and above, 46 percent of the
workers we studied in the HRS reported having completely retired before
their 63rd birthday. In addition, Social Security administrative data
shows that 62 remains the median age for starting to draw Social
Security benefits--meaning that half of recipients born in the years
1935 through 1940 began drawing benefits before they reached age 62 ˝.
There is, nevertheless, evidence that some workers have started drawing
benefits later than workers born in earlier years--changes that
coincide with changes in Social Security policy. First, there is a
slightly smaller proportion of people subject to the higher full
retirement age who are drawing Social Security benefits at age 62.
Second, although in years past many workers started Social Security
benefits when they reached age 65, more recently workers have had full
retirement ages some months after they turned 65 and often waited until
those ages to start benefits. Third, there are indications that a
somewhat higher proportion of people are working in their late 60s
following the elimination of the Social Security earnings test for
people at or above full retirement age.
Our analysis indicates that employer-provided retiree health insurance
and pension plans are strongly associated with when workers retire.
After controlling for other factors, we found that those with retiree
health insurance in our HRS study group were substantially more likely
to retire before the Medicare eligibility age of 65 than those who
lacked such coverage. This may reflect the scarcity of affordable
options workers have for obtaining health insurance on their own. With
regard to our analysis of current employer-sponsored pension plans, we
found that men with DB plans were about 28 percent more likely to
retire before age 62 than those without these pensions. We found no
statistically significant relationship between DB pensions and the age
at which women retired. On the other hand, we found that men and women
with DC plans were less likely to retire before age 62 than those
without DC pensions.
The results of any given policy change continue to be difficult to
project given the many countervailing forces at work and workers'
sometimes limited understanding of the incentives they face.
Nonetheless, as policy makers consider reforms to the Social Security
and Medicare programs, it will be important to consider the
consolidated impact of the incentives that such reforms might create
and act to send signals that consistently encourage those able to
continue working to do so. In light of the range of challenges facing
the country in the 21st century, Congress may wish to consider changes
to laws, programs and policies that support retirement security,
including retirement ages, in order to provide a set of signals that
work in tandem to encourage work at older ages.
We provided a draft of this report to the Social Security
Administration, the departments of Labor, Health and Human Services,
and Treasury. The Department of Health and Human Services commented on
the report, generally agreeing with our findings on the incentives
posed by Medicare and retiree health insurance. (See appen. V.) In
addition, SSA and the departments of Labor and the Treasury provided
technical comments, which we have incorporated as appropriate.
Background:
Demographic Changes:
In the 21st century, older Americans are expected to make up a larger
share of the U.S. population, live longer, and spend more years in
retirement than previous generations. The share of the U.S. population
age 65 and older is projected to increase from 12.4 percent in 2000 to
19.6 percent in 2030 and continue to grow through 2050. In part, this
is due to increases in life expectancy. The average number of years
that men who reach age 65 are expected to live is projected to increase
from just over 13 in 1970 to 17 by 2020. Women have experienced a
similar rise--from 17 years in 1970 to a projected 20 years by 2020.
These increases in life expectancy have not, however, resulted in an
increase in the average number of years people spend in the workforce.
While life expectancy has increased, labor force participation rates of
older Americans only began to increase in recent years.[Footnote 2] As
a result, individuals are generally spending more years in retirement.
In addition to these factors, fertility rates at about the replacement
level are contributing to the elderly population's increasing share in
the total population and a slowing in the growth of the labor force.
Also contributing to the slowing in the growth of the labor force is
the leveling off of women's labor force participation rate. While
women's share of the labor force increased dramatically between 1950
and 2000--from 30 percent to 47 percent--their share of the labor force
is projected to remain at around 48 percent over the next 50 years.
While hard to predict, the level of net immigration can also affect
growth in the labor supply.[Footnote 3] Taking each of these factors
into account Social Security's trustees project that the annual growth
rate in the labor force, about 1.2 percent in recent years, will fall
to 0.3 percent by 2022.
The aging of the baby boom generation, increased life expectancy, and
fertility rates at about the replacement level are expected to
significantly increase the elderly dependency ratio--the estimated
number of people aged 65 and over in relation to the number of people
aged 15 to 64 (fig. 1). In 1950, the ratio was 12.5 percent. It
increased to 20 percent in 2000 and is projected to further increase to
33 percent by 2050. As a result, there will be relatively fewer younger
workers to support a growing number of Social Security and Medicare
beneficiaries. The age at which workers choose to retire has
implications for these trends. If workers delay retirement, the ratio
of workers to the elderly will decrease more slowly.[Footnote 4]
Figure 1: U.S. Elderly Population is Rising Compared to the Working-Age
Population:
[See PDF for image]
Source: GAO analysis of Census Bureau estimates and projections.
Note: Population age 65 and older as a percent of population age 15 to
64. Data for 2006 through 2050 are projected. The elderly dependency
ratio equals the number of people age 65 and older divided by the
number between age 15 and 64, expressed as a percentage.
[End of figure]
The aging of the population also has potential implications for the
nation's economy. As labor force growth continues to slow as projected,
there will be relatively fewer workers available to produce goods and
services. In addition, the impending retirement of the baby boom
generation may cause the net loss of many experienced workers and
possibly create skill gaps in certain occupations. Without a major
increase in productivity or higher than projected immigration, low
labor force growth will lead to slower growth in the economy compared
with growth over the last several decades and potentially slower growth
of federal revenues. Social Security's trustees project that real
(inflation-adjusted) GDP growth will subside from 2.6 percent in 2007
to 2.0 percent in 2040, in part due to slower growth in the labor
force. The prospect of slower economic growth is likely to accentuate
the pressures on the federal budget from growing benefit claims and the
shrinking proportion of workers to beneficiaries. Later retirement and
increases in labor force participation by older workers could help
diminish those pressures.
Retirement Dynamics:
Retirement has traditionally been thought of as a complete one-time
withdrawal from the labor force. However, such transitions are no
longer as common. A recent study found that only half of first-time
retirees fully retired from the workforce and remained fully retired
after 3 to 5 years.[Footnote 5] The other half chose to partially
retire by reducing their work hours or taking bridge jobs--transitional
jobs between career work and complete retirement--or they re-entered
the labor force after initially retiring.[Footnote 6] According to our
analysis of the HRS, about one in five workers who fully retire later
re-enter the workforce on at least a part-time basis sometime over the
next 10 years. There are various reasons behind these trends. In some
cases, older workers need the income or benefits a job provides; in
other cases, they wish to start a new career in a different field. With
no universal definition of retirement, researchers use different
definitions depending on their purpose. Since our focus is on labor
force participation, we are using definitions of retirement that
combine whether or not people say they are retired with measures of
their labor force participation.[Footnote 7]
Workers have generally been retiring at younger ages over the last
several decades, but over more recent periods, retirement ages appear
to have stabilized. This finding holds for a variety of definitions of
retirement. Census Bureau data indicate that the average age at which
workers left the labor force dropped from about 71 and 70 years for men
and women respectively in 1960, to about age 65 for both men and women
in 1990 (fig. 2).[Footnote 8] Since that time, retirement trends appear
to have stabilized for men, with their retirement occurring on average
between 64 and 65. The retirement age for women continued to decline.
Similar trends appear in the age at which workers start drawing Social
Security benefits. From 1960 to 1990, the average age of workers
starting to draw Social Security benefits declined 3 years for men
(from 66.8 to 63.7) and about 2 years for women (from 65.2 to
63.5)[Footnote 9]. Since 1990, these averages have changed little. The
averages were 63.7 years for men and 63.8 for women in 2005. In
addition, in the 2007 Retirement Confidence Survey, workers responded
on average that they planned to retire at age 65, up from age 62 in
199[Footnote 10]6. We, along with others, have suggested that
increasing labor force participation for older workers could lessen
problems for the economy and the Social Security and Medicare trust
funds, and boost income security for retirees as well.[Footnote 11]
Figure 2: Average Effective Retirement Ages, 1960 to 2006:
[See PDF for Image]
Source: OECD analysis of Census Bureau data.
Note: This is a 5-year moving average based on labor force
participation data in the Current Population Survey. For each 5-year
period ending in the year shown in the figure, the effective age of
retirement corresponds to the average age of exit for all labor force
participants initially aged 40 and over who were no longer in the labor
force 5 years later.
[End of figure]
Workers retire for a variety of reasons, some of which are under their
control while others are not. Some personal reasons for retiring
include workers' job situation, their financial situation, and social
norms regarding retirement. In addition, there are often factors
outside of a person's control that may lead to retirement. According to
focus groups that we conducted in 2005 with workers and retirees, we
found that health problems and layoffs were common reasons to retire
and that few focus group members saw opportunities to gradually or
partially retire. Workers also cited what they perceived as their own
limited skills and employers' age discrimination as barriers to
continued employment.[Footnote 12] Similarly to our focus group
results, the Employee Benefit Research Institute (EBRI) found that an
estimated 37 percent of workers retire sooner than they had
expected.[Footnote 13] Of those, the most often cited reasons were
health problems or disability, changes at their company, such as
downsizing or closure, or having to care for a spouse or another family
member. The role federal policies play in influencing retirement
behavior needs to be considered as well. Depending on workers'
circumstances, these policies can provide incentives to retire at
certain ages, and send signals or set norms about when it is
appropriate to retire. In addition, many employers have structured
their own retirement benefits, such as pension eligibility ages, based
on federal policies.
Federal Policies Provide Incentives for both Early and Late Retirement:
Federal policies present a mix of retirement incentives, some of which
encourage individuals to retire well before their Social Security full
retirement age and others that promote staying in the workforce. (See
fig. 3 below.) The effect of these incentives also varies substantially
with personal circumstances. In general, the availability of Social
Security benefits at age 62 offers an incentive to retire before full
retirement age, though changes in program rules are progressively
weakening that incentive. The recent elimination of the Social Security
earnings test for those at full retirement age and beyond, which had
formerly reduced benefits for those beneficiaries who had earnings
above a certain threshold, also may discourage drawing benefits early.
The fact that most individuals are eligible for Medicare at age 65
generally deters them from leaving the labor force before then,
especially if they are not covered by retiree health
insurance.[Footnote 14] Federal pension tax policies give employers
discretion to set pension plan rules that provide incentives for many
workers to retire somewhat earlier than the norms established by Social
Security, often age 55, or in some cases earlier. However, these
incentives to retire early apply to fewer workers, due to the
diminished prevalence of DB plans.
Figure 3: Federal Retirement Age-Related Rules:
[See PDF for image]
Source: GAO analysis of Social Security, Medicare and pension tax laws.
[A] The age 70 ˝ rule applies by April 1 of the year following the year
in which the participant turns 70 ˝. Some exceptions apply, but not for
IRAs.
[B] For workers born in 1937 or earlier the Social Security full
retirement age is 65 and 0 months. For those born in later years it is
as follows:
1938 - 65 years and 2 months:
1939 - 65 years and 4 months:
1940 - 65 years and 6 months:
1941 - 65 years and 8 months:
1942 - 65 years and 10 months:
1943 through 1954 - 66 years and 0 months:
1955 - 66 years and 2 months:
1956 - 66 years and 4 months:
1957 - 66 years and 6 months:
1958 - 66 years and 8 months:
1959 - 66 years and 10 months:
1960 and later - 67 years and 0 months.
[C] Distributions without tax penalty are allowed at any age in cases
where distributions are a series of substantially equal periodic
payments for the beneficiary's life or life expectancy, or in other
cases including rollover distributions, total and permanent disability,
and death.
[End of figure]
Social Security Policies Provide Mixed Incentives, While Recent Program
Changes Reward Later Retirement:
Several characteristics of the Social Security program--including
eligibility ages and the earnings test--provide incentives to retire at
different ages. The Social Security full retirement age, which has
traditionally been age 65, is gradually rising to 67. However, workers
can begin receiving reduced benefits at 62; benefits are progressively
larger for each month workers postpone drawing them, up to age
70.[Footnote 15] In general, benefits are "actuarially neutral" to the
Social Security program; that is, the reduction for starting benefits
before full retirement age and the credit for starting after full
retirement age are such that the total value of benefits received over
one's lifetime is approximately equivalent for the average
individual.[Footnote 16] However, Social Security creates an incentive
to start drawing early retirement benefits for those who are in poor
health or otherwise expect to have a less than average
lifespan.[Footnote 17] If a worker lives long enough--past a "break-
even" age--he or she will receive more in life-long retired worker
benefits by starting benefits at a later, rather than an earlier date.
(See figure 4 below for examples of the kinds of considerations workers
face in making a decision about when to begin drawing Social Security
benefits.)
Figure 4: Lifetime Social Security Retired Worker Benefits are Higher
if a Worker Starts Benefits Later and Lives Past His or Her Break-Even
Age, Analysis of a Hypothetical Case:
[See PDF for image]
Source: GAO analysis.
Notes: This figure illustrates the case of a worker born in 1950 (with
a full retirement age of 66) who would be entitled to a monthly retired
worker benefit of $1,000 beginning at age 62 or a monthly benefit of
$1,333 beginning at age 66--a 33 percent increase. This assumes no
increase in adjusted indexed monthly earnings. If earnings during
additional years of work from age 62 through age 65 are high enough to
increase the workers' adjusted average earnings over the best 35-years
of credited work, the break-even age would be lower. The break-even age
varies depending on the ages at which the worker is considering
starting benefits and the amounts of benefits available at each age.
As Social Security benefits are adjusted annually for changes in the
CPI for wage earners, dollar amounts are shown in constant (inflation-
adjusted) terms as of the worker's 62nd birthday. These calculations do
not reflect discounting or adjustments for interest rates that may
increase the break-even age if, for example, a worker would increase
debt or decrease savings as a result of delaying the start of retired-
worker benefits. The average last survivor life expectancy is the
average life expectancy as of the 62nd birthday for the longest-lived
spouse if a man and a woman are born on the same day in 1950.
For additional information about break-even ages, see SSA's Web site at
hyperlink, http://www.ssa.gov/OACT/quickcalc/when2retire.html.
[End of figure]
The increase in full retirement age and the larger penalty for early
retirement reduce the incentive to start drawing Social Security
benefits and retiring early.[Footnote 18] Because the early retirement
age has remained fixed at 62 while full retirement age is gradually
rising to 67, workers taking early retirement benefits are
progressively incurring bigger reductions. For example, workers who
reached 62 in 1999 and started drawing benefits that year faced a
reduction of 20 percent because their full retirement age was 65. In
contrast, workers drawing benefits when they turn 62 in 2022, when
their full retirement age will be 67, will face a 30 percent reduction.
On the other hand, workers with health problems may now have a greater
incentive to apply for Social Security Disability Insurance as these
benefits are not based on age.[Footnote 19]
Social Security rules can pose different incentives for married workers
because their decision about when to start drawing benefits has
important implications for the surviving spouse. For example, if a
retired worker who is entitled to a larger benefit than his spouse
starts drawing early benefits and dies shortly thereafter, his widow
may be left for many years with a relatively small survivor benefit
since her payment would be limited to what he was receiving.[Footnote
20] This risk affects female survivors in particular. Widow
beneficiaries are one of the largest and most vulnerable groups with a
relatively high incidence of poverty.[Footnote 21]
The Social Security earnings test gives some workers a disincentive to
earn more than a specified amount. Because of the earnings test, people
collecting Social Security benefits before their full retirement age
who continue to work are subject to further reduction or withholding in
their benefits if they earn above a threshold. For example, in 2007, $1
of benefits is withheld for every $2 of earnings over $12,960.[Footnote
22] Although early beneficiaries generally recoup the amounts withheld
because of the earnings test in the form of higher recalculated
benefits after they reach full retirement age, workers typically view
the earnings test as a tax on work.[Footnote 23] As such, it provides
an incentive to reduce the number of hours worked or stop working
altogether.[Footnote 24] Since 2000, beneficiaries who reach their full
retirement age are exempt from the earnings test. The elimination of
the test for these individuals is an incentive to start benefits at
full retirement age and continue working.[Footnote 25]
Medicare's Age Requirement Generally Provides an Incentive Not to
Retire Before 65:
Because Medicare provides health insurance coverage for virtually all
individuals 65 and older, it has important implications for the
decision about when to retire.[Footnote 26] The Medicare eligibility
age, fixed at 65 since the program's inception, is a strong incentive
not to retire before that age, particularly for people who do not have
employer-sponsored health benefits as retired workers. These
individuals would either have to purchase expensive private coverage if
they retired before 65, or remain uninsured until they qualify for
Medicare because private health insurance may be difficult to obtain at
older ages, especially for those with pre-existing medical
conditions.[Footnote 27] Given the steep rise in health care costs and
the high health risks older people face, Medicare's eligibility age
encourages them to delay retirement until age 65.[Footnote 28] Workers
with no employer-based health insurance during their working years are
arguably less affected by Medicare eligibility rules because their
decision to retire does not affect their health coverage. However, to
the extent that they are exposed to the same potentially expensive
health problems as they get older, Medicare does provide an incentive
to postpone retirement until age 65 because retirement often involves a
significant drop in income.
The incentive posed by Medicare may become more important if the
proportion of workers with no retiree health insurance continues to
increase. The share of large private employers offering retiree health
insurance declined from an estimated 66 percent in 1988 to 35 percent
in 2006.[Footnote 29] Similarly, a 2003 study found that only about one-
quarter of private sector employees worked for companies that offered
retiree health insurance.[Footnote 30] Further, the value of the
coverage for retirees is eroding because of higher costs, eligibility
restrictions, and other benefit changes. A recent study estimated that
the percentage of after-tax income spent on health care by the typical
older married couple will almost double from 16 percent in 2000 to 35
percent in 2030.[Footnote 31]
On the other hand, Medicare's availability at 65 can be an incentive to
retire before Social Security's rising full retirement age. Eligibility
for Medicare upon reaching age 65 encourages workers to retire then,
rather than wait to collect somewhat higher Social Security benefits
when they reach their later full retirement age.[Footnote 32]
Certain Tax Laws for Pension Plans Enable Employers to Create
Incentives for Retirement before Age 62:
Federal tax and pension laws, including the Employee Retirement Income
Security Act (ERISA), give employers some discretion to set retirement
ages and other terms and conditions that support earlier retirement for
workers who have employer-sponsored pension plans. For example, IRS
rules on tax-qualified pensions put an upper limit on what may be
treated as a "normal retirement age" (NRA).[Footnote 33] For a DB plan,
this can be no greater than age 65.[Footnote 34] In practice, some
employers have set their NRA lower.[Footnote 35] According to the
Department of Labor's 2003 National Compensation Survey, 17 percent of
private workers with DB plans had an NRA less than 65 and 6 percent had
no age requirement. Many workers with DB plans could retire with
reduced benefits at age 55.[Footnote 36] IRS rules also state that
payouts with specified minimum amounts must generally begin by about
age 70 ˝.[Footnote 37] Additionally, tax rules generally permit
withdrawals without penalty from both DB and DC plans (including IRAs)
as early as age 59 ˝. Exceptions to this rule allow for even earlier
withdrawals. For example, participants can access their funds without
penalty beginning at age 55 if they leave their current
employer.[Footnote 38] Workers taking distributions prior to age 59 ˝
may do so without the tax penalty if they receive the distribution in
the form of a fixed annuity.[Footnote 39] For those who are no longer
working for the plan's sponsor, tax law generally requires at a minimum
that such a series of payments begin at about age 70 ˝ at the latest or
that they receive a lump sum payment of the entire amount. If a plan
participant is working for the plan sponsor at age 70 ˝ the required
distributions must generally begin in the calendar year in which he or
she stops working for the employer maintaining the plan.[Footnote 40]
Workers who have employer-sponsored pension plans from their current
employer constitute only about half of full-time private sector
workers. Employers have increasingly shifted from traditional DB to DC
pension plans.[Footnote 41] Specifically, in 1992, about 29 percent of
heads of household had a DB plan; by 2004, the figure had dropped to 20
percent. Over this same period, the proportion of household heads with
DC plans increased from about 28 percent to 34 percent.
As the prevalence of DC plans has increased relative to DB plans,
workers face a different set of incentives.[Footnote 42] The benefits
of a worker covered by a DB plan often reach their high value when the
worker attains a specific age, and as a result, may offer little
incentive to work past that age.[Footnote 43] The predetermined
retirement benefit generally depends on years of service and wages or
salaries, and changes little after its peak value, especially if
subsequent salary increases are not substantial.[Footnote 44]
Additional years of work after the NRA, often age 65 for private sector
workers in 2003, do not necessarily change lifetime retirement benefits
because of the shortened retirement period.[Footnote 45] (See table 1
for an example showing the effect of another year of work with a
hypothetical DB pension.)
Table 1: A Delay in Retirement Can Result in Lower Lifetime Benefits
from a DB Pension, Analysis of a Hypothetical Case:
Annual pension beginning age 62; 1.5% x $31,177 x 35 years of service;
Retire at 62: $16,368;
Retire at 63: [Empty];
Difference: [Empty].
Annual pension beginning age 63; 1.5% x $ $32,112 x 36 years of
service; (adjusted for inflation at 3 percent);
Retire at 62: [Empty];
Retire at 63: $16,836;
Difference: [Empty].
Increase in annual pension as a result of the 36th year of work;
Retire at 62: [Empty];
Retire at 63: [Empty];
Difference: $468.
Total pension expected over a retirement based on remaining life
expectancy at 62nd birthday (average for men and women); $16,368 x 21.2
years adjusted for inflation;
Retire at 62: 248,965;
Retire at 63: [Empty];
Difference: [Empty].
Total pension expected over a retirement beginning on 63rd birthday
based on remaining life expectancy at 62nd birthday; $16,836 x 20.2
years adjusted for inflation;
Retire at 62: [Empty];
Retire at 63: 246,694;
Difference: [Empty].
Increase (decrease) in lifetime benefit for retirement at age 63
compared with retirement at age 62;
Retire at 62: [Empty];
Retire at 63: [Empty];
Difference: (2,270).
Source: GAO analysis.
[End of table]
With DC plans, benefit levels depend on total employer and employee
contributions and investment earnings; as such, DC plans do not offer
the same age-related retirement incentive as DB plans. Individuals
typically allocate the balance of their DC accounts among bonds,
stocks, and money market funds, bearing all of the investment risks. In
addition, since at retirement most DC plans allow people to receive the
accumulated value of the funds in their account as a lump sum,
individuals also bear the risk of outliving their resources. The fact
that different people will make different contribution and investment
decisions is likely to lead to a greater variability in retirement
ages. (See table 2 below for an example showing the effect of another
year of work on lifetime benefits with a DC pension.)
Table 2: A Delay in Retirement Can Result in Higher Lifetime Benefits
from a DC Pension, Analysis of a Hypothetical Case:
401(k) balance on 62nd birthday;
Retire at age 62: $200,000;
Retire at age 63: $200,000;
Difference: [Empty].
Expected interest on the balance (at 5.125 percent) during an
additional year of work;
Retire at age 62: [Empty];
Retire at age 63: 10,250;
Difference: [Empty].
Worker's contribution during additional year of work;
Retire at age 62: [Empty];
Retire at age 63: 3,000;
Difference: [Empty].
Employer's matching contribution during additional year of work;
Retire at age 62: [Empty];
Retire at age 63: 1,500;
Difference: [Empty].
Expected earnings during the year on additional contributions;
Retire at age 62: [Empty];
Retire at age 63: 115;
Difference: [Empty].
Total expected balance on 63rd birthday;
Retire at age 62: [Empty];
Retire at age 63: 214,865;
Difference: [Empty].
Total expected balance on 63rd birthday adjusted for inflation at 3%;
Retire at age 62: [Empty];
Retire at age 63: 208,607;
Difference: [Empty].
Annuity beginning age 62 based on balance of $200,000 (annual amount);
Retire at age 62: 16,368;
Retire at age 63: [Empty];
Difference: [Empty].
Annuity beginning age 63 based on a balance of $214,865 adjusted for
inflation (annual amount);
Retire at age 62: [Empty];
Retire at age 63: 17,417;
Difference: [Empty].
Increase in annual pension as a result of the 36th year of work;
Retire at age 62: [Empty];
Retire at age 63: [Empty];
Difference: $1,049.
Total pension expected over the period of retirement (lifetime benefit)
based on life expectancy at 62nd birthday; $16,368 x 21.2 years
(adjusted for inflation at 3 percent);
Retire at age 62: 248,965;
Retire at age 63: [Empty];
Difference: [Empty].
Total pension expected over the period of retirement beginning on 63rd
birthday (lifetime benefit) based on life expectancy at 62nd birthday;
$16,917 x 20.2 years (adjusted for inflation at 3 percent);
Retire at age 62: [Empty];
Retire at age 63: 255,220;
Difference: [Empty].
Increase (decrease) in lifetime benefit for retirement at age 63
compared with retirement at age 62;
Retire at age 62: [Empty];
Retire at age 63: [Empty];
Difference: 6,255.
Source: GAO analysis.
Note: Both pension holders in tables 1 and 2 would receive the same
annual pension if they retire on their 62nd birthdays. Both would
realize an increase in their annual pension income if they worked
another year and retired on their 63rd birthday, but the amount of the
DC annual pension would increase more. The worker with a DB pension
wouldn't receive enough of an increase to compensate for the shorter
expected period of retirement.
[End of table]
While a DB pension plan generally does not encourage continued work
after a certain age, recent changes in DB pension provisions have
created an incentive to remain in the workforce somewhat longer. First,
recent IRS regulations permit workers to receive money from their DB
plans while still working after they have reached the plan's
NRA.[Footnote 46] These regulations also include rules restricting a
plan's NRA. Those reaching a plan's NRA or age 62 who want to reduce
the number of hours they work for a particular employer may be able to
do so and at the same time receive prorated pension benefits. As a
result, these workers are able to ease out of their jobs while
maintaining their previous level of income by combining paycheck and
pension.[Footnote 47] The new provisions are likely to encourage longer
careers by formally allowing more flexible work arrangements and the
opportunity to gradually transition into retirement rather than make a
sudden shift. By comparison, participants in DC plans can often begin
receiving their pension at age 59 ˝ while continuing to work (if
allowed by their plan administrator), so they often face fewer
limitations to phased retirement.[Footnote 48]
Half of Workers Retire Well before Their Full Retirement Age, Although
Early Evidence Points to Some Changes Following Recent Implementation
of Social Security Policies:
About half of those in the HRS study group reported being fully retired
by the time they reached age 63, and over the last several years SSA
data indicate that nearly half started drawing benefits at age 62 and 1
month, their earliest opportunity to do so.[Footnote 49] However, there
is some evidence that this behavior is starting to change to a limited
extent. With the graduated rise in full retirement ages for persons
born after 1937, a somewhat smaller proportion of these workers are
starting to draw benefits at 62. Others are waiting to draw benefits
until the higher full retirement ages that apply to them. Also, since
the January 2000 elimination of the earnings test for workers at full
retirement age and beyond, labor force participation among such older
workers has increased.
Despite Social Security's full retirement age of 65 and later, we found
that about half of the workers in the HRS study group reported that
they fully retired by age 63. Specifically, an estimated 46 percent of
workers born in 1931 through 1941 reported fully retiring before their
63rd birthday, based on our analysis of workers interviewed in the HRS
sample.[Footnote 50] As shown in figure 5 below, we found a pattern of
retirement marked by a steady increase in retirements among people in
their late 50s until ages 62 and 65, when the numbers increase sharply.
For workers in the study group the estimated probability of fully
retiring prior to age 60 was 28 percent, and the estimated probability
prior to age 65 was 60 percent.
Nearly Half of Workers Fully Retire before Reaching Age 63:
Figure 5: Retirement Pattern among Workers Born from 1931 to 1941:
[See PDF for image]
Source: GAO analysis of RAND HRS data.
Note: This analysis is for workers born 1931 through 1941. It excludes
outliers among workers born in 1937, 1938, and 1939. Workers born in
1940 or 1941 had not reached age 65 by the end of the study period, so
the probabilities at later ages are not shown. Those who reached 65
during the study period were classified as having the following labor
force status at that age: 56 percent were fully retired; 15 percent
were partially retired; 19 percent were working full time; 5 percent
were working part time; 4 percent were not in the labor force; 2
percent were disabled; and 0.4 percent were unemployed.
[End of figure]
Social Security Administration data provide similar indications of
early retirement patterns. Many workers begin drawing Social Security
benefits at age 62. Half the workers born 1935 through 1940 started to
draw Social Security benefits before they reached age 62 ˝. The most
common age was 62 and 1 month--the earliest age at which most workers
are eligible. Only about 13 to 17 percent of workers born in these
years started to draw benefits at their full retirement age.
In a 2005 study, researchers analyzing the characteristics of workers
who began drawing Social Security benefits at age 62 found that many
had no earnings or comparatively low earnings in the years before they
reached age 62.[Footnote 51] Among workers in this study born in 1937
(who reached 62 in 1999), for example, 20 percent had no earnings at
age 55, and this figure rose to 32 percent at age 61 for men who
started drawing Social Security benefits at age 62.[Footnote 52] The
comparable figures for those who started drawing benefits between age
63 and 65 ranged from 11 to 12 percent. It is not clear to what extent
these low earners or non-earners had chosen to retire before reaching
age 62 or whether they were in the labor force, but not able to find
work before reaching age 62. As discussed above, EBRI found that an
estimated 37 percent of workers retire sooner than they had expected
to. The most often cited reasons were health problems or disability,
changes at their company, such as downsizing or closure, or having to
care for a spouse or another family member.
Early Evidence Points to Small Changes in the Ages at Which Workers
Start Drawing Social Security Benefits:
Social Security administrative data for those born between 1935 and
1940 provide evidence of some modest changes in retirement behavior
among the first group of workers subject to the increases in the Social
Security full retirement age. First, a declining proportion of workers
are starting to draw benefits as soon as they are eligible. Whereas 46
or 47 percent of those with a full retirement age of 65 and 0 months
(born in 1935 through 1937) started benefits at the earliest
opportunity, 45 to 42 percent of those who were subject to an increased
full retirement age did so, as shown in table 3 below.[Footnote 53]
That many workers continue to start drawing benefits at the earliest
opportunity may, in part, reflect workers' lack of knowledge about
their full retirement age. A 2007 survey indicated that an estimated 56
percent of workers aged 55 and over incorrectly identified or did not
know the age at which they can receive unreduced Social Security
benefits.[Footnote 54]
Table 3: Early Evidence That Some Workers Are Delaying the Start of
Social Security Retired Worker Benefits:
Birth year: 1935;
Full Retirement Age: 65 and 0 months;
Percent of workers starting to draw benefits: At the earliest
opportunity[A]: 47;
Percent of workers starting to draw benefits: At full retirement
age[B]: 17;
Percent of workers starting to draw benefits: By month before 65th
Birthday[C]: 78;
Percent of workers starting to draw benefits: By month before 66th
Birthday[D]: 97.
Birth year: 1936;
Full Retirement Age: 65 and 0 months;
Percent of workers starting to draw benefits: At the earliest
opportunity[A]: 47;
Percent of workers starting to draw benefits: At full retirement
age[B]: 16;
Percent of workers starting to draw benefits: By month before 65th
Birthday[C]: 79;
Percent of workers starting to draw benefits: By month before 66th
Birthday[D]: 97.
Birth year: 1937;
Full Retirement Age: 65 and 0 months;
Percent of workers starting to draw benefits: At the earliest
opportunity[A]: 46;
Percent of workers starting to draw benefits: At full retirement
age[B]: 15;
Percent of workers starting to draw benefits: By month before 65th
Birthday[C]: 80;
Percent of workers starting to draw benefits: By month before 66th
Birthday[D]: 96.
Birth year: 1938;
Full Retirement Age: 65 and 2 months;
Percent of workers starting to draw benefits: At the earliest
opportunity[A]: 45;
Percent of workers starting to draw benefits: At full retirement
age[B]: 13;
Percent of workers starting to draw benefits: By month before 65th
Birthday[C]: 77;
Percent of workers starting to draw benefits: By month before 66th
Birthday[D]: 96.
Birth year: 1939;
Full Retirement Age: 65 and 4 months;
Percent of workers starting to draw benefits: At the earliest
opportunity[A]: 43;
Percent of workers starting to draw benefits: At full retirement
age[B]: 13;
Percent of workers starting to draw benefits: By month before 65th
Birthday[C]: 73;
Percent of workers starting to draw benefits: By month before 66th
Birthday[D]: 95.
Birth year: 1940;
Full Retirement Age: 65 and 6 months;
Percent of workers starting to draw benefits: At the earliest
opportunity[A]: 42;
Percent of workers starting to draw benefits: At full retirement
age[B]: 13;
Percent of workers starting to draw benefits: By month before 65th
Birthday[C]: 71;
Percent of workers starting to draw benefits: By month before 66th
Birthday[D]: 95.
Source: GAO analysis of SSA data.
Note: Rows for birth years 1938, 1939, and 1940 identify workers
subject to a full retirement age after their 65th birthday. The
estimated percentage of workers born in 1936 through 1940 who are
expected to draw benefits, but had not done so by the end of 2006 was
0, 1, 2, 3, and 5 percent, respectively.
[A] Cumulative percent from 62 and 0 months through 62 and 1 month.
[B] Percent of workers at 65 and 0 months for workers born 1935 through
1937, at 65 and 2 months for those born in 1938; 65 and 4 months for
those born in 1939; and 65 and 6 months for those born in 1940.
[C] Cumulative percent from 62 and 0 months through 64 and 11 months.
[D] Cumulative percent from 62 and 0 months through 65 and 11 months.
[End of table]
Second, along with changes in the proportion of workers drawing Social
Security retired worker benefits at the earliest opportunity, we see
early indications of changes at workers' full retirement ages. The
traditional rise in the proportion of workers beginning to draw
benefits at their 65th birthday has largely shifted in concert with the
gradual rise in the age required by Social Security for full retired
worker benefits.[Footnote 55] As shown in figure 6 below, some of the
workers in successive cohorts who were born after 1937 have waited
additional months to start drawing benefits--that is, until their
higher full retirement ages.[Footnote 56]
Figure 6: People Typically Begin Drawing Retired Worker Social Security
Benefits at Age 62 or at Full Retirement Age:
[See PDF for image]
Source: GAO analysis of SSA data.
Note 1: This graph shows estimates for ages 62 and 0 months through 66
and 0 months. The maximum proportion for ages 66 and 1 month through 70
and over was 1 percent. Although the proportion of workers starting
benefits each month after age 62 and 1 month and before age 65 is
relatively low, the cumulative percent of workers starting benefits
during this period was substantial --ranging from 29 percent for those
born in 1940 to 33 percent for those born in 1936 and 1937.
Note 2: These percentages are calculated as the number of workers
starting to draw benefits at each age in months divided by the total
number of workers born in the same year who have or are expected to
eventually draw benefits. These figures for benefits awarded in 1997
through 2006 exclude workers who had previously drawn disability
benefits and subsequently begun drawing retired worker benefits. The
workers born in 1940 reached age 66 in 2006 and those born in 1935
reached age 71 in 2006.
[End of figure]
Following Elimination of the Earnings Test, More Workers Are Remaining
in the Labor Force beyond Full Retirement Age:
Along with these modest delays in claiming Social Security benefits
that are associated with the rising full retirement age, we found that
some increases in labor force participation coincided with the
elimination of the earnings test in January 2000. Our analysis of all
workers in the HRS sample found that the proportion of 66 and 67 year
olds who were employed (full-time, part-time, or partially retired)
increased between 2000 and 2004 by 4 percentage points.[Footnote 57]
Another researcher's analysis of BLS data found that between 1994 and
2005, the proportion of 65 to 69 year olds in the labor force increased
by about 7 percentage points for men and by about 6 percentage points
for women. While there may be a variety of reasons for this upward
trend, some researchers attribute it to the elimination of the Social
Security earnings test. After controlling for other factors associated
with retirement, one study concluded that the labor force participation
rate among those 65 to 69 increased by 0.8 to 2 percentage points and
that earnings for this group increased.[Footnote 58] The authors
hypothesized that this increase resulted from the retention of older
workers who were still in the workforce instead of attracting retirees
to return to work. This study also found that applications for Social
Security benefits among individuals at ages 65 or above increased and
that earnings for this group increased as well. A second study also
concluded that the elimination of the earnings test had increased labor
force participation among older workers, and that there was some
indication that participation rates among younger workers increased in
anticipation of this policy change.[Footnote 59] A third study found
that men aged 66 to 69 had an increase in annual earnings of $1,326
following the earnings test elimination.[Footnote 60] This study did
not find that labor force participation increased overall, but rather
that the hours per week worked by men increased. A final study found
the effect of the elimination of the earnings test has not only been
confined to those above full retirement age. Rather, this change has
resulted in men with earnings above the earnings test threshold
reporting an increased probability that they will work after full
retirement age.[Footnote 61]
These studies also indicate that relatively more workers in the upper-
middle income range have responded to the elimination of the earnings
test by continuing to work. Specifically, two studies found that
earnings increased for those in the higher income percentiles, but not
for those in lower income groups.[Footnote 62] See appendix III for
more information on these studies.
Tax-Favored Private Retiree Health Insurance and Pension Plans May
Influence Retirement Patterns:
We found employer-provided retiree health insurance and pension plans
are strongly associated with when workers retire based on our analysis
of retirement behavior using the HRS.[Footnote 63] We found that
workers with access to retiree health insurance were more likely to
retire before age 65 than those without it.[Footnote 64] However, other
factors, such as poor health, could become an overriding factor for
some of these workers, in terms of their retirement decisions. At the
beginning of the study period (1992), those workers who lacked retiree
health insurance tended to be those with lower incomes and levels of
education.[Footnote 65] Pension plans also influenced the timing of
workers' retirements, though this varied by type of pension plan. Men
with DB plans were more likely to retire earlier, whereas both men and
women with DC plans tended to retire later compared to those who did
not have these plans.[Footnote 66]
Workers with Employer-Provided Retiree Health Benefits Have Been More
Likely to Retire before 65:
Our analysis of retirement behavior suggests that workers who have
access to health insurance in retirement are substantially more likely
to retire before becoming eligible for Medicare at age 65 than those
without such access.[Footnote 67] Men with retiree health insurance
either through their own or their spouse's current or former employer
were an estimated 86 percent more likely to retire before they turned
65 than those who were not eligible for benefits in retirement. Women
with retiree health insurance were more than twice as likely (139
percent more likely) to retire by this same age. We also found that
workers with retiree health insurance were more likely to retire before
they became eligible for early Social Security benefits at the age of
62 (109 percent and 76 percent more likely, respectively for men and
women). For a complete discussion of our model results, please see
appendix II. The population without access to retiree health insurance
tended to be those with lower incomes and less education. See Appendix
IV for information on the demographic characteristics of people with
access to retiree health insurance at the beginning of the study
period.
These findings are consistent with a larger body of research indicating
a strong link between health insurance availability and retirement
decisions. For example, a 2002 study found that having retiree health
insurance available increased the likelihood of workers retiring before
age 65 by an estimated 15 to 35 percent.[Footnote 68] According to the
2003 Health Confidence Survey, almost 80 percent of current workers
over age 40 consider their access to health insurance in planning the
age at which they expect to retire.[Footnote 69] That people without
access to retiree health insurance are more likely to wait until they
are eligible for Medicare to retire may reflect the scarcity of options
for affordable health insurance outside of employer-based plans.
Particularly for those in poor health, market-based health insurance
coverage may be prohibitively costly.
Health problems that limit work lead to earlier retirement for many
workers regardless of the availability of retiree health benefits.
After controlling for other factors, including whether one had access
to retiree health insurance, we found that men who said that their
health limited their work were over two times more likely to retire by
age 62 and that women were 96 percent more likely to do so. Similarly,
men and women reporting these limitations were more likely to retire by
age 65 (71 percent and 72 percent, respectively).[Footnote 70]
Pension Plans May Influence Retirement Timing, but This Effect Differs
by Pension Type:
We found that men with DB plans generally retired earlier than those
without, while both men and women with DC plans generally retired
later, based on our analysis of the HRS data.[Footnote 71] After
controlling for other factors, men with DB plans through either their
employer or their spouse's employer were 28 percent more likely to
retire before age 62.[Footnote 72] Results for women were not
statistically significant. On the other hand, we found that men with DC
plans were 47 percent less likely to retire by 62 than those without DC
plans.[Footnote 73] We found a similar effect for women as well; those
with DC plans were 37 percent less likely to retire before 62 than
those without DC plans. Looking at retirements before or after age 65,
we did not find a significant effect of having a DB pension plan.
However, we continued to find a diminished likelihood of retiring
before age 65 among those with DC plans, with men 35 percent less
likely to retire by age 65 and women 45 percent less likely to retire
than those without DC plans.
Our finding that men with DB pensions were more likely to retire before
age 62 is consistent with a larger body of research that finds that the
structure of DB plans can lead to earlier retirements. One study found
that the differences in retirement patterns for those with DB or DC
pensions were related to the ability of DB plans to subsidize
retirements at ages as early as age 55. Some of these pensions allow
long-tenured individuals to collect early benefits that are high enough
to provide an incentive to retire early.[Footnote 74] DC plans, on the
other hand, are generally neutral with regard to retirement age since
DC account balances depend on contributions made by both employers and
employees instead of years of service. Another study found that
retirement patterns for those with DB plans and those with DC plans
began to differ at around age 55. Differences increased at around age
60, when the value of lifetime benefit began decreasing for most
workers with DB plans.[Footnote 75] This same study found that the
absence of retirement incentives tied to age in DC plans led people
with those plans to retire on average almost two years later than those
with DB plans.
Conclusions:
The age at which workers retire is important for the sake of their
retirement income security, the cost of federal programs for the
elderly, federal tax revenue, and the strength of the U.S. economy. In
deciding when to retire, workers weigh their personal circumstances,
the features of employers' benefit plans as well as the mix of
incentives and disincentives posed by federal policies. Some of these
policies encourage earlier retirement; others encourage later
retirement; and different groups of workers face differing incentives.
While preliminary evidence indicates that some workers subject to full
retirement ages after their 65th birthday are drawing Social Security
benefits a little later and working more after age 65 than their
predecessors, more time is needed to determine whether these changes
foretell any substantial shifts. With so many factors influencing
workers' decisions about when to retire, changes may be gradual and
limited. Moreover, changes made to one program have the potential to
create an inconsistent set of incentives. For example, as Social
Security's full retirement age rises to age 67, Medicare's eligibility
age remains at 65. Medicare's eligibility age may become increasingly
important in workers' decisions about when to retire as the
availability of employer-sponsored retiree health insurance declines.
In recent years, federal policy makers have considered various options
to modify policies in hopes of promoting later retirements and
continued work in later years. However, the results of any given policy
change continue to be difficult to project given the many
countervailing forces at work and workers' sometimes limited
understanding of the incentives they face. To date, we see indications
of some changes in retirement behavior, but do not yet see large
changes. At the same time, trends in employer-provided retirement
benefits have clear implications for workers' retirement decisions. Our
results suggest that with declining access to retiree health insurance
and DB pension plans, those individuals who can, may indeed choose to
work longer. This trend suggests the need for federal initiatives to
help support workers who make that choice. These may include policies
that encourage employers to hire or retain older workers and provide
them with flexible options for continued work. In addition, there will
be a continued need for federal policies to ensure that workers are
informed about the advantages of continued work, as well as to protect
and support those who, due to poor health or disability, are unable to
work at older ages.
Given the increased pressures that demographic shifts will place on
entitlement programs, the mix of incentives offered by programs such as
Social Security and Medicare, as well as pension law, becomes more
questionable. Ultimately, it will be important for policy makers to
understand the incentive structures that their policies create, and to
coordinate their decisions to allow for individual flexibility, but
send signals that consistently encourage those who are able to continue
working to do so.
Matter for Congressional Consideration:
Accordingly, in light of the range of challenges facing the country in
the 21ST century, Congress may wish to consider changes to laws,
programs, and policies that support retirement security, including
retirement ages, in order to provide a set of signals that work in
tandem to encourage work at older ages.
Agency Comments:
We provided a draft of this report to the Social Security
Administration and the departments of Labor, Health and Human Services,
and the Treasury. The Department of Health and Human Services commented
on the report, generally agreeing with our findings on the incentives
posed by Medicare and retiree health insurance. (See appen. V.) In
addition, SSA, and the departments of Labor and the Treasury provided
technical comments, which we incorporated where appropriate.
We are sending copies of this report to the Commissioner of Social
Security, the Secretary of the Treasury, the Secretary of Labor, and
the Secretary of Health and Human Services. We will also make copies
available to others on request. In addition, the report will be
available at no charge on GAO's Web site at http://www.gao.gov/.
If you or your staff have any questions about this report, please
contact me at (202) 512-7215 or bovbjergb@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix VI.
Signed by:
Barbara D. Bovbjerg, Director:
Education, Workforce, and Income Security Issues:
List of Congressional Committees:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable Edward M. Kennedy:
Chairman:
The Honorable Michael B. Enzi:
Ranking Member:
Committee on Health, Education, Labor, and Pensions:
United States Senate:
The Honorable Herb Kohl:
Chairman:
The Honorable Gordon H. Smith:
Ranking Member:
Special Committee on Aging:
United States Senate:
The Honorable Tom Davis:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Charles B. Rangel:
Chairman:
The Honorable Jim McCrery:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
The Honorable Michael R. McNulty:
Chairman:
The Honorable Sam Johnson:
Ranking Member:
Subcommittee on Social Security:
Committee on Ways and Means:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to 1) identify incentives federal policies provide
about when to retire; (2) determine recent retirement patterns and
whether there is evidence that recent changes in Social Security
requirements have resulted in later retirements; and 3) determine if
there is evidence that tax-favored private retiree health insurance and
pension benefits influence when people retire.
To answer our first objective, we reviewed the relevant literature and
interviewed agency officials to identify which federal policies may
influence the age at which workers retire.
To answer our second objective, we analyzed data from the Social
Security administration and reviewed studies of the effects of changes
in SSA rules. We used the SSA data to look at when workers, who were
between the ages of 66 to 71 in 2006, chose to start Social Security
retired worker benefits. While these data allowed us to examine
patterns in men's and women's claiming of Social Security benefits,
they did not contain any other personal information that would allow us
to control for differences between workers. Therefore, we were able to
use these data for descriptive purposes only. We analyzed these data
and found them to be reliable for our purposes.
To answer the third objective, we first analyzed data from the Health
and Retirement Study (HRS), a national, longitudinal survey of older
Americans produced by the University of Michigan.[Footnote 76] In
particular, we used a data set that the RAND Corporation compiled on
the HRS, which is a more user-friendly subset of the HRS. This rich
data set contains information on retirement timing and a wide variety
of associated factors, such as demographic characteristics, income,
assets, health, health care insurance, workforce status, pensions, and
retirement expectations. In addition, it tracks respondents over time,
allowing us to look at the initial HRS cohort (those born from 1931 to
1941) over a 12 year period from 1992 to 2004.[Footnote 77] We
conducted both bivariate and multivariate analyses to determine what
factors were associated with workers' decisions about when to retire,
with special attention to Social Security, health care, and pension
availability. See appendix II for a full description of these analyses.
We analyzed this dataset and found it to be reliable for our purposes.
We conducted our work between July 2006 and June 2007 in accordance
with generally accepted government auditing standards.
This appendix is organized into three sections to more fully describe
the methods we used to analyze our data, with particular focus on our
analysis of the RAND HRS data: Section 1 describes the definitions of
retirement used in this analysis. Section 2 describes how we selected
our different samples for analysis. Section 3 describes limitations to
our analysis.
Retirement Definitions:
As other researchers have done, we used different definitions for
retirement in different parts of our analysis. In particular, we
considered workers to be retired based on one of four different
definitions, which are explained in table 4 below:
Table 4: Definitions of Retirement:
Reported retirement;
Source of data: HRS;
Definition: The respondent reports being either completely or partly
retired to the question "At this time do you consider yourself
completely retired, partly retired, or not retired at all.".
Full retirement[A];
Source of data: HRS;
Definition: To be considered fully retired, a respondent must report
not working for pay at all, and report being retired in response to the
question above or another question concerning retirement and employment
status.
Partial retirement[A];
Source of data: HRS;
Definition: The respondent reports working between 1 and 35 hours per
week or less than 36 weeks per year, and reports being retired in
response to either of the questions referred to above.
Social Security retirement;
Source of data: SSA administrative data;
Definition: The worker has started drawing Social Security retired
worker benefits, excluding people who earlier drew disabled worker
benefits and automatically converted to retired worker benefits.
Source: HRS and SSA.
[A] A respondent is considered fully or partially retired based on a
labor force status variable that the RAND Corporation constructs using
several questions in the HRS. If a respondent reports working full-time
he or she is classified as working full-time rather than retired,
whether or not he or she also reports being retired.
[End of table]
We conducted our multivariate analysis based on two of these retirement
definitions. Since our focus in this study is on when people decided to
fully withdrawal from the labor force, our primary analysis was of
those who had fully retired. We also ran an analysis on those who had
fully or partially retired and received similar results. For our
analysis of the claiming of Social Security benefits, we used the
definition of Social Security retirement. Finally, for some of our
descriptive results of those who said they retired prior to the
beginning of the HRS, we used our definition of reported retirement.
Sample Selection:
Just as we used different definitions of retirement, we also chose
different samples of workers. Since our goal in analyzing the HRS data
was to model retirement behavior, we sought to look at individuals who
had a chance to retire; in other words, they had reached traditional
ages of retirement. Therefore, we focused our analysis on those in the
HRS cohort who were born between 1931 and 1941. These individuals were
between the ages of 63 and 73 in 2004, when the most recent data for
the HRS were collected. Second, we chose individuals who had been in
the labor force for at least 10 years so that they could qualify for
Social Security retired worker benefits based on their own work
history. To calculate certain descriptive statistics, we just applied
the above two criteria to create a worker sample. For our regression
analyses, we added the stipulation that a respondent was in the
workforce in 1992 when the HRS began.[Footnote 78] Applying these
criteria excludes respondents who had retired, were out of the labor
force (such as homemakers), or those who were not working due to
disability in 1992.[Footnote 79] This allowed us to model the act of
retiring from the labor force. In addition, we were not able to observe
the behavior of those who retired outside of the 1992 to 2004 study
period. See table 5 below for the criteria we used to construct these
samples.
Table 5: Selection of Samples for Analysis of Health and Retirement
Study Respondents:
Sample: RAND HRS Sample[A];
Criteria applied: [Empty];
Respondents dropped: [Empty];
Unweighted number of respondents remaining: 12,652.
Sample: Health and Retirement Study Worker Sample;
Criteria applied: Respondents born 1931 through 1941;
Respondents dropped: 2,903;
Unweighted number of respondents remaining: 9,749.
Criteria applied: Had 10 years of work experience prior to age 62[B];
Respondents dropped: 1,133;
Unweighted number of respondents remaining: 8,616.
Sample: Sample for Logistic Regression Analysis of Full Retirement;
Criteria applied: Respondents born 1931 through 1941;
Respondents dropped: [Empty];
Unweighted number of respondents remaining: 9,749.
Criteria applied: Had ten years of work experience by age 62[B];
Respondents dropped: 1,133;
Unweighted number of respondents remaining: 8,616.
Criteria applied: In labor force in 1992 (working full time, working
part time, unemployed, or partially retired in wave 1)[C];
Respondents dropped: 1,834;
Unweighted number of respondents remaining: 6,782[D].
Source: GAO Analysis of RAND HRS data.
Note:This table includes only respondents with a positive respondent
statistical weight. The respondent level weight is non-zero for living
noninstitutionalized respondents born in the appropriate years. It is
zero for nonrespondents, deceased respondents and respondents residing
in nursing homes. It is scaled so as to yield weight sums which
correspond to the number of individuals in the U.S. population as
measured by the March Current Population Survey (CPS) for the year of
data collection.
[A] RAND HRS file release F, October 2006. See Patricia St. Clair et
al., RAND HRS Data Documentation, Version F (Santa Monica, Calif.: May
2006).
[B] Based on responses to question concerning work history and job
tenure in any HRS study wave 1992 through 2004.
[C] Based on RAND's construction of a labor force status variable,
RxLBRF. RAND assigned respondents to these categories: works full-time,
works part-time, unemployed, partly retired, retired, disabled, or not
in the labor force.
[D] The number of respondents studied who fully retired is greater than
the number who partially or fully retired, because 313 respondents who
were partially retired in wave one were excluded from our analysis of
full or partial retirement but included in our analysis of full
retirement.
[End of table]
Although the HRS cohort is a nationally representative sample of those
born from 1931 to 1941, the samples that we constructed may not
be.[Footnote 80] In comparing some of the descriptive statistics of our
samples with those from the larger HRS sample, there are differences,
as shown in table 6 below. In particular, the sample used to analyze
full retirement decisions had a greater proportion of those in better
health, those with access to retiree health insurance, and higher
income than either the HRS cohort or the worker sample.
Table 6: Descriptive Statistics for Our Different Samples:
Weighted: Demographics as of wave 1 (1992): Percent male;
HRS cohort individuals born 1931 - 1941: 48%;
Worker sample: 52%;
Full retirement sample: 55%.
Weighted: Demographics as of wave 1 (1992): Percent married;
HRS cohort individuals born 1931 - 1941: 74%;
Worker sample: 75%;
Full retirement sample: 75%.
Weighted: Demographics as of wave 1 (1992): Percent white non-Hispanic;
HRS cohort individuals born 1931 - 1941: 81%;
Worker sample: 82%;
Full retirement sample: 83%.
Weighted: Demographics as of wave 1 (1992): Percent with high school
education or more;
HRS cohort individuals born 1931 - 1941: 77%;
Worker sample: 80%;
Full retirement sample: 82%.
Weighted: Demographics as of wave 1 (1992): Percent who have access to
retiree health insurance through respondent's or spouse's current
employer;
HRS cohort individuals born 1931 - 1941: 52%;
Worker sample: 54%;
Full retirement sample: 55%.
Weighted: Demographics as of wave 1 (1992): Percent who have DB plan
from respondent's or spouse's current employer[A];
HRS cohort individuals born 1931 - 1941: 45%;
Worker sample: 47%;
Full retirement sample: 53%.
Weighted: Demographics as of wave 1 (1992): Percent who have good, very
good, or excellent health;
HRS cohort individuals born 1931 - 1941: 80%;
Worker sample: 82%;
Full retirement sample: 88%.
Weighted: Demographics as of wave 1 (1992): Annual earned income in
2003 dollars[B];
HRS cohort individuals born 1931 - 1941: [Empty];
Worker sample: [Empty];
Full retirement sample: [Empty].
Weighted: Demographics as of wave 1 (1992): Percent less than $10,000;
HRS cohort individuals born 1931 - 1941: 38%;
Worker sample: 31%;
Full retirement sample: 18%.
Weighted: Demographics as of wave 1 (1992): Percent $10,000 or more,
but less than $25,000;
HRS cohort individuals born 1931 - 1941: 18%;
Worker sample: 20%;
Full retirement sample: 23%.
Weighted: Demographics as of wave 1 (1992): Percent $25,000 or more,
but less than $50,000;
HRS cohort individuals born 1931 - 1941: 25%;
Worker sample: 28%;
Full retirement sample: 33%.
Weighted: Demographics as of wave 1 (1992): Percent $50,000 or more;
HRS cohort individuals born 1931 - 1941: 19%;
Worker sample: 21%;
Full retirement sample: 26%.
Source: GAO analysis of RAND HRS data.
[A] Those with a DB plan may have also had a DC plan. Those without a
DB plan may have had a DC plan or no pension plan. Similarly, in our
analysis of DC plans, we grouped respondents with both DB and DC plans
along with those reported having only a DC plan.
[B] This includes the respondent's earnings (including wages, salary,
and bonuses from employment or self-employment), but not their spouse's
income. It excludes other types of income, such as interest, dividends,
and rent.
[End of table]
Limitations:
We identified factors associated with the decision about when to retire
rather than the causes of that decision. Our analysis of the factors
associated with retirement timing is limited to the definition of
retirement that we used; others may have different definitions of
retirement. Some people working part-time consider themselves retired;
others do not. In addition, we cannot generalize our findings beyond
the group of workers included in our sample. Our findings do not
necessarily apply to younger groups of workers, who may not behave in
the same way or face the same constraints. As mentioned earlier, our
sub-sample of workers from the larger HRS sample cohort is not entirely
representative of the larger US population. In addition, we were unable
to observe the retirement behavior of those who retired before and
after the study period. Finally, due to limitations in the data and the
methods that we used, we did not include in our analysis some variables
identified during our research that could potentially affect workers'
retirement timing. For example, the RAND HRS includes information on a
respondent's pension from a current job, but not prior jobs. Our
analysis did not include measures of wealth or income other than
earnings. Also, we did not analyze lump sum payments from pensions,
which could influence retirement decisions. In addition, the RAND HRS
data rely heavily on people's knowledge of their finances, work
history, pension options, et cetera. Studies show that workers are
sometimes misinformed about the details of their pension benefits or
the age at which they are eligible for full Social Security
benefits.[Footnote 81]
[End of section]
Appendix II: Logistic Regression Analysis of Factors Associated with
Workers' Retirement Timing:
This appendix describes the results of two separate analyses we did to
determine what factors were associated with whether or not men and
women retired 1) before or after age 62, and 2) before or after age 65.
We conducted both of these analyses separately for men and women due to
sizable gender differences in labor force participation and because
data published by the census suggested that the factors that affected
retirement decisions may be different for the two groups.[Footnote 82]
The data we used in our analyses were from the HRS cohort of men and
women who were born from 1931 to 1941 and thus were between the ages of
63 to 73 in 2004, which was the last year for which we had data. We
restricted our attention to workers who had been in the labor force for
at least 10 years prior to age 62. In our analysis of whether workers
retired before age 62, we limited the analysis to those who had reached
age 62 at some point in the study period. Similarly, in our analysis of
whether workers retired before age 65, we limited the analysis to those
who had reached age 65 at some point in the study period, and we
eliminated workers who, based on their birth year, could not reach age
65 by 2004. In addition, we excluded those individuals who were not
part of the labor force in the first wave of data collection (1992);
see comparison of samples in appendix I.
The HRS dataset is a longitudinal dataset, meaning there are multiple
observations per respondent. Respondents were interviewed every 2
years. Each observation is called a wave. In our data set there were
seven waves of data (1992 to 2004). For our analysis we limited the
data set to one observation per respondent. We selected the observation
by taking the first wave the respondent was noted as retiring in the
age specific analysis (62 and 65). If the respondent did not retire in
that time frame, we selected the wave closest to when the participant
was age 62 or 65. For each observation we calculated an age of
retirement if the respondent noted that he or she retired. For example,
if the respondent noted retiring in wave five and reported a retirement
date that fell between waves four and five, we used the reported
retirement date as the age of retirement and used wave 4 responses in
our analysis. However, if the respondent did not report a retirement
date or if the retirement date did not fall between two previous waves
of data collection and the current wave, then we imputed the retirement
date using the midpoint between the waves. For example, if a respondent
noted retiring in wave six but did not report a retirement date and had
data for wave five we imputed their age of retirement as the midpoint
between wave five and six. For those respondents who did not retire by
the specified age used in our analyses (by age 62 or by age 65), we
used their age at the end of the interview to select the observation
closest to that specified age.
These restrictions meant we had samples of 2,840 men and 2,519 women in
our analyses of whether retirement occurred by age 62, and 1,978 men
and 1,779 women in our analyses of whether retirement occurred by 65.
It should be noted that the sample sizes represent unweighted samples.
Our samples differed slightly from the overall HRS sample (see appendix
1 for comparison). The data are from a complex sample, and all analyses
were performed using statistical weights and adjusting the standard
errors for the sample design. Only respondents with statistical weights
greater than zero were included in the analyses (based on HRS
documentation for statistical weights). The (weighted) percentages
reported in some of the tables of this appendix do not exactly match
what would be derived from the (unweighted) numbers reported.
The factors or independent variables we considered in the two sets of
analyses are shown in table 7, along with the unweighted numbers and
weighted percentages of men and women in each category of those
factors. These factors included selected demographic characteristics,
including occupation, race/ethnicity, education, marital status, age
difference with spouse, income (specifically earnings), work tenure,
and birth year. Occupation was divided into three categories: white
collar, services, and blue collar. White collar included managerial,
professional, sales, clerical, and administrative support occupations.
Services included cleaning business services, protection, food
preparation, health services, and personal services. Blue collar
included farming, forestry, fishing, mechanics and repair, construction
and extraction, precision production, operators, and members of the
armed forces. We based these categories on a previous GAO report that
utilized the HRS data.[Footnote 83] The income variable--the
respondent's earned income--was adjusted for inflation using CPI values
to make all dollars comparable to 2003 dollars.[Footnote 84] The
factors also included a general measure of health status, an indicator
of whether health limited the ability to work, and measures indicating
whether the workers in our sample had any health insurance. In
addition, we considered whether the spouse or respondent had retiree
health insurance, a DB plan, and a DC plan. For many of our variables,
we lagged them to the prior wave to capture workers' preretirement
characteristics. For example, if the respondent is noted as retiring in
wave 4, the income variable from wave 3 was used in the regression. If
the prior wave was missing, that respondent was not included in the
analysis. For all of the lagged variables the data collected from 2
years prior was used in the analysis (the HRS respondents were
interviewed every two years). Table 7 also shows the numbers and
percentages of men and women who had and had not retired by ages 62 and
65. An estimated 25 percent of the men and 28 percent of the women in
our sample had retired by age 62, and of those who had reached age 65
by 2004, an estimated 48 percent of the men and 53 percent of the women
had retired. The following results are based on our full retirement
definition (see appendix I for definition of full retirement).
Table 7: Numbers and Percentages of Men and Women in Different
Categories of the Variables Used in Analyses of Full Retirement Timing:
Retirement decision: Retired;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 700 (24.6);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 726 (28.1);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 990 (48.3);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 967 (52.7).
Retirement decision: Not retired;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 2140 (75.4);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1793 (72.0);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 988 (51.7);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 812 (47.3).
Previous wave occupation.
Demographic characteristics: White collar;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1283 (50.2);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1630 (70.3);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 918 (51.5);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 1129 (69.2).
Demographic characteristics: Services;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 171 (5.8);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 500 (17.6);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 109 (5.1);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 361 (18.0).
Demographic characteristics: Blue collar;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1277 (44.1);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 334 (12.1);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 882 (43.4);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 250 (12.8).
Race/ ethnicity: White/ non-Hispanic;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 2213 (84.5);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1844 (82.2);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1559 (85.3);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 1321 (83.2).
Race/ ethnicity: Black/ non-Hispanic;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 349 (7.7);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 466 (10.6);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 241 (7.6);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 316 (10.2).
Race/ ethnicity: Hispanic/ other;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 278 (7.8);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 209 (7.2);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 178 (7.1);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 142 (6.6).
Education: 5yr Resp;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 56 (2.5);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 310 (13.4);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 36 (2.5);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 224 (13.1).
Previous wave income categories[A]: 0-<10,000;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 666 (23.3);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 753 (29.5);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 594 (30.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 622 (34.3).
Previous wave income categories[A]: 10,000-<25,000;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 418 (13.6);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 752 (29.4);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 301 (13.7);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 511 (28.1).
Previous wave income categories[A]: 25,000-<50,000;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 871 (29.4);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 734 (29.0);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 535 (26.4);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 476 (27.0).
Previous wave income categories[A]: >=50,000;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 885 (33.7);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 280 (12.1);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 548 (30.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 170 (10.6).
Tenure at current job in previous wave-categories: 0-<5;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 670 (25.7);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 557 (25.7);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 465 (26.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 377 (24.4).
Tenure at current job in previous wave-categories: 5-<15;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 690 (26.2);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 761 (34.8);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 463 (25.3);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 530 (34.8).
Tenure at current job in previous wave-categories: 15-<25;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 467 (16.9);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 547 (24.0);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 315 (17.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 400 (24.3).
Tenure at current job in previous wave-categories: >=25;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 808 (31.2);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 385 (15.5);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 576 (31.8);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 286 (16.5).
Birth year categories: 1931, 1932;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 481 (16.6);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 395 (15.5);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 443 (21.9);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 363 (20.7).
Birth year categories: 1933, 1934;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 487 (16.1);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 436 (16.8);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 434 (21.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 415 (22.8).
Birth year categories: 1935, 1936;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 524 (17.8);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 446 (17.2);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 474 (24.1);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 411 (22.8).
Birth year categories: 1937;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 255 (9.2);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 243 (9.8);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 241 (12.7);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 233 (13.6).
Birth year categories: 1938, 1939;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 549 (20.0);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 481 (19.0);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 386 (20.4);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 357 (20.1).
Birth year categories: 1940, 1941;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 544 (20.3);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 518 (21.8);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): n/a;
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): n/a.
Health related.
Health status previous wave: Excellent/ very good/ good;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 2343 (84.0);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 2100 (85.3);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1634 (84.2);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 1474 (84.6).
Health status previous wave: Fair/ poor;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 496 (16.0);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 419 (14.7);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 344 (15.8);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 305 (15.4).
Previous wave: health limits work: No;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 2437 (86.2);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 2134 (85.7);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1697 (86.3);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 1501 (85.2).
Previous wave: health limits work: Yes;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 396 (13.8);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 371 (14.3);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 273 (13.7);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 267 (14.8).
Previous wave: health insurance: No;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 643 (21.7);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 620 (23.1);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 496 (23.8);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 501 (26.5).
Previous wave: health insurance: Yes;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 2197 (78.4);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1899 (76.9);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1482 (76.2);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 1278 (73.5).
Previous wave: retiree health insurance R or S[B]: No;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1405 (49.6);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1343 (53.0);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 964 (48.2);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 993 (55.3).
Previous wave: retiree health insurance R or S[B]: Yes;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1435 (50.5);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1176 (47.0);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1014 (51.8);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 786 (44.7).
Pension related.
Prior wave DB pension type of R or S[B]: No DB;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 960 (36.0);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 771 (35.4);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 657 (35.5);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 554 (36.3).
Prior wave DB pension type of R or S[B]: DB pension;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1646 (64.0);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1393 (64.6);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1174 (64.6);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 967 (63.7).
Prior wave DC pension type of R or S[B]: No DC;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1012 (36.6);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 837 (37.3);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 700 (36.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 587 (36.9).
Prior wave DC pension type of R or S[B]: DC pension;
N (and weighted percentage): For full retirement before age 62: Male
(N=2840): 1624 (63.4);
N (and weighted percentage): For full retirement before age 62: Female
(N=2519): 1327 (62.7);
N (and weighted percentage): For full retirement before age 65: Male
(N=1978): 1131 (64.0);
N (and weighted percentage): For full retirement before age 65: Female
(N=1779): 934 (63.1).
Source: GAO analysis of RAND HRS data.
[End of table]
[A] Respondent's earned income adjusted for inflation:
[B] R= respondent; S= Spouse. The RAND HRS data provided information
about DC and DB pensions from current employment during the 1992
through 2004 study period. It did not provide data concerning any
pensions from respondents' or spouses' previous employers.
[End of table]
We used bivariate (one variable) and multivariate (multiple variables)
logistic regression models to estimate the likelihood of men and women
being retired, first at age 62 and then at age 65. Logistic regression
is a widely accepted method of analyzing dichotomous outcomes--
variables with two values such as retired or not--when the interest is
in determining the effects of multiple factors that may be related to
one another. While it is somewhat more common to consider how different
categories of workers differ in their likelihoods of being retired by
calculating and comparing differences in the percentages of retired and
non-retired workers across categories, the use of these models in our
analysis requires us to express differences in the likelihoods of being
retired using odds ratios. An "odds ratio" is generally defined as the
ratio of the odds of an event occurring in one group compared to the
odds of it occurring in another group--the reference group. While odds
and odds ratios are somewhat less familiar than percentages and
percentage differences, they have certain advantages, and can be
readily derived from the underlying percentages or from the numbers
from which those percentages were calculated. Moreover, odds ratios are
amenable to a reasonably simple interpretation, as we show in Table 8.
In addition, unadjusted and adjusted odds ratios are the parameters
that underlie our logistic regression models.
Table 8 shows the numbers and percentages of men who were retired by
age 62, first across marital status categories, and then across
categories defined by race/ethnicity. Typically we would compare groups
by contrasting the percentages of retired or not retired individuals in
each group and noting, in this case for example, that the percentage of
individuals retired by age 62 is greater among unmarried men (30.1
percent) than married men (23.3 percent), and lower for Hispanic men
(17.4 percent) than for Black men (25.4 percent) and white men (25.1
percent). Alternatively, we can calculate the odds on retiring for each
group by simply taking the percentage who retired in each group and
dividing it by the percentage who had not retired. The odds on retiring
were 30.1/69.9 = 0.43 for unmarried men, and 23.3/76.7 = 0.30 for
married men. Making similar calculations, the odds were virtually
identical for white men and Black men (0.34, apart from rounding) but
lower for Hispanic men (0.21). We can compare groups directly by taking
the ratios of these odds, given in the "Odds Ratios" column in table 8.
As can be seen, the odds on retiring were higher for unmarried men than
for married men, by a factor of 0.431/0.304 = 1.42. To compare race/
ethnicity categories, we choose (arbitrarily) one group (white men in
this case) as the reference category, make similar calculation by
taking the ratios of the odds for the other two groups to the odds for
white men, and find that Black men have odds on retiring that are only
slightly different than white men (higher by a factor of 1.02), while
Hispanic men are less likely than white men to retire, by a factor of
0.63.
Table 8: Full Retirement Status at Age 62, by Marital Status and Race/
Ethnicity, among Men:
Married;
N;
Full retirement status at age 62: Fully retired: 561;
Full retirement status at age 62: Not fully retired: 1806;
Odds on retired: [Empty];
Odds ratios: [Empty].
Married;
%;
Full retirement status at age 62: Fully retired: 23.3;
Full retirement status at age 62: Not fully retired: 76.7;
Odds on retired: 0.30;
Odds ratios: reference.
Unmarried;
N;
Full retirement status at age 62: Fully retired: 138;
Full retirement status at age 62: Not fully retired: 334;
Odds on retired: [Empty];
Odds ratios: [Empty].
Unmarried;
%;
Full retirement status at age 62: Fully retired: 30.1;
Full retirement status at age 62: Not fully retired: 69.9;
Odds on retired: Total: 0.43; Odds ratios: 1.42.
Total;
N;
Full retirement status at age 62: Fully retired: 699;
Full retirement status at age 62: Not fully retired: 2140;
Odds on retired: [Empty];
Odds ratios: [Empty].
Total;
%;
Full retirement status at age 62: Fully retired: 24.6;
Full retirement status at age 62: Not fully retired: 75.5;
Odds on retired: [Empty];
Odds ratios: [Empty].
White;
N;
Full retirement status at age 62: Fully retired: 557;
Full retirement status at age 62: Not fully retired: 1656;
Odds on retired: [Empty];
Odds ratios: [Empty].
White;
%;
Full retirement status at age 62: Fully retired: 25.1;
Full retirement status at age 62: Not fully retired: 74.9;
Odds on retired: 0.34;
Odds ratios: reference.
Black;
N;
Full retirement status at age 62: Fully retired: 95;
Full retirement status at age 62: Not fully retired: 254;
Odds on retired: [Empty];
Odds ratios: [Empty].
Black;
%;
Full retirement status at age 62: Fully retired: 25.4; Full retirement
status at age 62: Not fully retired: 74.6;
Odds on retired: 0.34;
Odds ratios: 1.02.
Hispanic;
N;
Full retirement status at age 62: Fully retired: 48;
Full retirement status at age 62: Not fully retired: 230;
Odds on retired: [Empty];
Odds ratios: [Empty].
Hispanic;
%;
Full retirement status at age 62: Fully retired: 17.4;
Full retirement status at age 62: Not fully retired: 82.6;
Odds on retired: 0.21;
Odds ratios: 0.63.
Total;
N;
Full retirement status at age 62: Fully retired: 700;
Full retirement status at age 62: Not fully retired: 2140;
Odds on retired: [Empty];
Odds ratios: [Empty].
Total;
%;
Full retirement status at age 62: Fully retired: 24.6;
Full retirement status at age 62: Not fully retired: 75.4;
Odds on retired: [Empty];
Odds ratios: [Empty].
Source: GAO analysis of RAND HRS data.
[End of table]
Table 9 shows the gross effects of each of the factors we considered on
the odds on men and women retiring before age 62 (in the first two
columns) and before age 65 (in the last two columns). By gross effects,
we mean the effects of each factor estimated from bivariate
regressions, or regressions that ignore or fail to take account of the
effects of other factors which may be related to retirement. Table 10,
by contrast, shows the adjusted effects of the factors that we found to
be significantly related to retiring at age 62 or age 65 after
adjusting for other factors.
In developing our multivariate models, we controlled for income in the
previous wave, birth year categories, DB, and DC pension plans in the
previous wave, and retiree health insurance in the previous wave even
if the overall p-value for these variables is not statistically
significant. We adjusted for income in the previous wave because it is
a very strong demographic characteristic, and we adjusted for birth
year to account for any possible cohort effect in the HRS data.
Similarly, we adjusted for pension type (both DB and DC) and retiree
health insurance because we are interested in assessing the impact of
these policy variables on a respondent's decision to retire.
In order to assess factors associated with the retirement decisions at
specific ages in a multivariate setting, we wanted the most
parsimonious model without adding additional noise by factors that were
not statistically significant. To do this we iteratively fit a model by
first adjusting for all of the variables of interest (see Table 9).
After keeping in the five variables mentioned above (income, birth
year, and DB and DC pension, and retiree health insurance) we then
selected the variables that were statistically significant (p-value
<0.05) one at a time. Then after the reduced model was fit we re-
entered the variables that we excluded to see if any became
statistically significant in the presence of the variables from the
reduced model. The results from the multivariate models retain the
statistically significant associations (p-value <0.05) and exclude
those that reflected insignificant effects, or difference in the sample
that could reasonably be assumed to be due to chance or random
fluctuations. Some factors that were correlated with other variables
and were statistically significant in the bivariate analysis were not
statistically significant in the final multivariate model when we
adjusted for these other factors. We assessed our final model for
goodness of fit using the Hosmer Lemeshow goodness of fit statistic,
which tests the hypothesis that the data fit the specified model. All
our multivariate models fit the data appropriately (p-values for model
fit >0.05). We provide the gross or unadjusted effects in table 9 in
order to show what effect each factor has when other factors with which
they are associated are ignored, or left uncontrolled. By gross
effects, we mean the effects of each factor estimated from bivariate
regressions, or regressions which ignore or fail to take account of the
effects of other factors which may be related to retirement. We focus
our discussion here however, as well as in the body of the report, on
the adjusted odds ratios from the multivariate models, shown in table
10. The results in the table 10 only reflect the statistically
significant adjusted odds ratios. However, all models include income,
birth year, retiree health insurance, and DB and DC pension plans. In
addition, some of the factors in the multivariate models have missing
data; therefore, the overall sample size from the multivariate models
differs from the sample size noted in table 9. We have assumed that the
missing values are missing at random.
The HRS is based on a probability sample and therefore the estimates
are subject to sampling error. The HRS sample is only one of a large
number of samples that could have been drawn of this population. Since
each sample could have provided different estimates, we express our
confidence in the precision of the analysis results as 95 percent
confidence intervals. These are intervals that would contain the actual
population values for 95 percent of the samples that could have been
drawn. As a result, we are 95 percent confident that each of the
confidence intervals in this report will include the true values in the
study populations.
All multivariate models were run using an alternative definition that
included partial and full retirement (see appendix I for definitions).
Results from these multivariate models were similar to the results
presented here. (Data not shown.)
Table 9: Odds Ratios and 95 Percent Confidence Intervals Indicating the
Gross (Bivariate) Associations between Various Factors and Full
Retirement before Age 62 and Age 65, for Men and Women:
Demographic characteristics.
Previous wave occupation;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *.
White collar;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
Services;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.47(0.98-2.21);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.87(0.67-1.13);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.27(0.81-1.99);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 0.92(0.73-1.16).
Blue collar;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.11(0.92-1.33);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.15(0.94-1.39);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.76(1.43-2.16);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.37(0.98-1.9).
Race/ ethnicity;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *.
White/ non-Hispanic;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
Black/ non-Hispanic;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.02(0.75-1.39);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.95(0.74-1.23);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.22(0.87-1.71);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.09(0.82-1.43).
Hispanic/ other;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 0.63(0.4-0.97);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.58(0.4-0.85);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.02(0.77-1.35);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 0.95(0.68-1.34).
Education;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *.
5yr Resp;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 0.5(0.22-1.14);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.26(0.93-1.71);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(0.37-2.72);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.62(1.2-2.18).
Previous wave income categories[B];
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): **;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): **.
0-<10,000;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
10,000-<25,000;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 0.94(0.69-1.28);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.65(0.48-0.87);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.57(1.16-2.13);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.05(0.83-1.32).
25,000-<50,000;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 0.88(0.69-1.12);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.73(0.57-0.95);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.96(1.57-2.46);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.47(1.1-1.97).
>=50,000;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.2(0.92-1.58);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.81(0.6-1.09);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 2.08(1.68-2.57);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.23(0.91-1.66).
Tenure at current job in previous wave-categories;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): **.
0-<5;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
5-<15;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 0.63(0.46-0.86);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.9(0.7-1.15);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 0.98(0.76-1.28);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 0.94(0.68-1.31).
15-<25;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.26(0.93-1.7);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.2(0.9-1.61);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.39(0.97-1.98);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.36(1-1.86).
>=25;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.63(1.25-2.13);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.51(1.11-2.06);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.81(1.37-2.39);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.35(0.96-1.89).
Birth year categories;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *.
1931, 1932;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
1933, 1934;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 2.16(1.5-3.1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 2.05(1.31-3.21);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.2(0.84- 1.71);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.18(0.84-1.67).
1935, 1936;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 2.88(1.91-4.34);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 2.13(1.41-3.22);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 0.99(0.68-1.45);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.06(0.75-1.49).
1937;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 2.48(1.48-4.16);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 2.75(1.53-4.94);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 0.9(0.6- 1.37);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.18(0.73-1.91).
1938, 1939;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 4.47(3.15-6.35);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 2.83(1.75-4.58);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.39(0.99-1.94);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.16(0.77-1.76).
1940, 1941;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 4.2(2.91-6.06);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 3.19(2.1-4.85);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): n/a[A];
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): n/a.
Health related.
Health status previous wave;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): *.
excellent/ very good/ good;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
fair/ poor;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.67(1.33-2.11);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.76(1.44-2.15);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.67(1.27-2.21);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.65(1.27-2.13).
Previous wave: health limits work;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): *.
no;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
yes;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 2.36(1.8-3.1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 2.13(1.67-2.72);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.81(1.28-2.55);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.68(1.3-2.18).
Previous wave: health insurance;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): **.
No;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
Yes;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.14(0.86-1.5);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.08(0.91-1.3);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.36(1.05-1.75);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.23(0.99-1.53).
Previous wave: retiree health insurance R or S[C];
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): *.
No;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
Yes;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.8(1.49-2.18);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.56(1.3-1.88);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.77(1.47-2.14);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 2.2(1.76-2.76).
Pension related.
Prior wave DB pension type of R or S[C];
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): **.
No DB;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
DB pension;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1.66(1.34-2.06);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1.24(1.04-1.49);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1.39(1.14-1.71);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1.19(0.97-1.47).
Prior wave DC pension type of R or S[C];
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): *;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): *.
No DC;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 1(1-1);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 1(1-1).
DC pension;
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Male (N=2840): 0.87(0.72-1.05);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 62: Female (N=2519): 0.82(0.64-1.07);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Male (N=1978): 0.8(0.65- 0.99);
Odds ratios (and 95 percent confidence intervals): For full retirement
before age 65: Female (N=1779): 0.66(0.53-0.82).
* indicates an overall Satterthwaite adjusted p-value <0.05:
** indicates an overall Satterthwaite adjusted p-value <0.10:
Source: GAO analysis of RAND HRS data.
Note: The RAND HRS data provided information about DC and DB pensions
from current employment during the 1992 through 2004 study period. It
did not provide data concerning any pensions from respondents' or
spouses' previous employers.
[A] Respondents born in 1940 and 1941 were excluded from the age 65
analysis because they would not have been 65 by the last wave of data
collection in 2004.
[B] Respondent's earned income adjusted for inflation:
[C] R= respondent; S= Spouse:
[End of table]
Table 10 shows that the odds on men retiring before age 62 were
affected by income, job tenure, birth year, health limitations, retiree
health insurance, and having DB and DC plans. All of the results can be
interpreted as adjusted odds ratios and the net effects of those
factors on early retirement for men can be described as follows, after
adjusting for the other factors:
* Men in the highest income category (who made greater than or equal to
$50,000 in the previous wave) were 1.76 times more likely than men
making less than $10,000 to retire by age 62. Men earning between
$10,000 and $25,000 and men earning between $25,000 and $50,000 were
not significantly different from men earning less than $10,000 in their
decisions to retire before 62.
* Men who had been working for 15 to less than 25 years were not
significantly different from men working less than 5 years at their
primary occupation (in the previous wave), but men who had worked 5 to
less than 15 years were less likely to retire by age 62 by a factor of
0.61 than men working less than 5 years. However, men working 25 years
or more were more likely than men working less than 5 years to be
retired by age 62, by a factor of 1. 6.
* Men born after 1933 were more likely than those born 1931 to 1932 to
be retired by age 62, by factors ranging (fairly linearly) from 2.2
(for those born 1933 to 1934) to 5.7 (for those born 1940 to 1941).
* The odds on retiring before age 62 were more than twice as high for
men who reported health limitations as for men without such
limitations, and were twice as high for men with retiree health
insurance as for those without retiree health insurance.
* The odds on retiring before age 62 were higher for men with a DB plan
than for those without, by a factor of 1.3, and lower for men with DC
plans than for those without, by a factor of 0.5.
The odds on women retiring before age 62 were affected by marital
status, job tenure, birth year, health status, health limitations,
retiree health insurance, and having a DC plan. Although not
statistically significant the final model also adjusted for income, an
important demographic characteristic, and DB plan, to account for
policy related variables. The net effects of those factors on early
retirement for women can be described as follows, after adjusting for
other factors:
* Unmarried women were only roughly half as likely as married women to
retire before age 62; that is, the odds on retiring before that age
were lower for unmarried women than for married women, by a factor of
0.57.
* Women who had been working for 5 to less than 15 years and 15 to less
than 25 years were not significantly different from women working less
than 5 years at their primary occupation (in the previous wave).
However, women working 25 years or more were more likely than women
working less than 5 years to be retired by age 62, by a factor of 1.7.
* As was the case with men, women born after 1933 were more likely than
those born 1931 to 1932 to be retired by age 62, by factors ranging
(again fairly linearly) from 2.9 (for women born 1933 to 1934) to 4.3
(for women born 1940 to 1941).
* The odds on retiring before age 62 were 1.5 times greater for women
who said they were in fair or poor health as for women in good or
excellent health, 2.0 times greater for women with health limitations
than for women without, and nearly twice as high for women with retiree
health insurance as for those without retiree health insurance.
* The odds on retiring before age 62 were lower for women with DC plans
than for those without, by a factor of 0.6.
The odds on men retiring before age 65 were affected by categories of
occupation, education, marital status, income, job tenure, health
limitations, retiree health insurance, and having a DC plan. Although
not statistically significant, we adjusted for birth year to control
for any possible cohort effects and DB plan to account for policy
related variables. The net effects of those factors on late retirement
for men can be described as follows, after adjusting for other factors:
* Men in the blue collar occupation category were 1.5 times more likely
to retire before age 65 than men in the white collar category. Men in
the services category were not significantly different from men in
white collar professions in their decision to retire prior to 65.
* Men with college or more education were 0.51 times less likely to
retire before age 65 compared to men with less than a high school
education. There were no statistically significant differences between
men with high school/ GED education and men with some college compared
to men with less than a high school education in their decision to
retire before age 65.
* The odds that unmarried men would retire before age 65 were 1.5 times
those of married men.
* Men with income greater than or equal to $10,000 were more likely to
retire prior to age 65 than men earning less than $10,000, by factors
ranging (fairly linearly) from 2.0 (for those earning between $25,000
to $50,000) to 3.1 (for those earning greater than or equal to
$50,000).
* Men who had been working for 5 to 15 years and those who had been
working 15 to 25 years were not significantly different from men
working less than 5 years at their primary occupation. But men who had
worked greater than or equal to 25 years were more likely than men
working less than 5 years to be retired by age 65, by a factor of 1.4.
* The odds on retiring before age 65 were almost twice as high (1.7)
for men who reported health limitations as for men without such
limitations and were almost twice as high for men with retiree health
insurance as for those without retiree health insurance.
* The odds on retiring before age 65 were lower for men with DC plans
than for those without, by a factor of 0.7.
The odds on women retiring before age 65 were affected by marital
status, spousal age difference, income, health status, health
limitations, retiree health insurance, and having DC plans. Although
not statistically significant, we adjusted for birth year to control
for a possible cohort effect and DB plan to account for policy-related
variables. The net effects of those factors on late retirement for
women can be described as follows, after adjusting for other factors:
* Unmarried women were roughly half as likely as married women to
retire before age 65; that is, the odds on retiring before that age
were lower for unmarried women than for married women, by a factor of
0.6.
* Women who were at least 5 years younger than their spouse were more
likely to retire before age 65 compared to women with no spouse or
women who were within 5 years of their spouses' age, by a factor of
1.5. There were no statistically significant differences on the odds of
retiring before age 65 for women who were more than 5 years older than
their spouse compared to women with no spouse or women who were within
5 years.
* The odds on retiring before age 65 were higher for women earning
$25,000 to $50,000 than for those earning less than $10,000, by a
factor of 1.6. Women earning between $10,000 to $25,000 and more than
$50,000 were not significantly different than the lowest earning women
in terms of their odds on retiring before age 65.
* The odds on retiring before age 65 were 1.5 times greater for women
who said they were in fair or poor health compared to women in good or
excellent health, 1.7 times greater for women with health limitations
than for women without, and nearly twice as high (2.4) for women with
retiree health insurance as for those without retiree health insurance.
* The odds on retiring before age 65 were lower for women with DC plans
than for those without, by a factor of 0.6.
Table 10: Adjusted Odds Ratios and 95 Percent Confidence Intervals
Indicating the Net (Multivariate) Associations between Various Factors
and Full Retirement before Age 62 and Age 65, for Men and Women:
Demographic characteristics.
Occupation in previous wave.
White collar;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
Services;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.18(0.66-2.09);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
Blue collar;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.45(1.13-1.85);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
Education.
5yr resp;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1.46(1.1-1.94).
Previous wave Income categories[A].
0-<10,000;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1(1-1).
10,000-<25,000;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1.27(0.83-1.95);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.97(1.28-3.04);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1.23(0.91-1.64).
25,000-<50,000;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1.17(0.83-1.64);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 2.14(1.59-2.89);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1.62(1.17-2.24).
>=50,000;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1.76(1.23-2.5);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 3.07(2.13-4.43);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1.27(0.86-1.87).
Tenure at current job in previous wave categories.
0-<5;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
5-<15;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 0.61(0.43-0.87);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1.06(0.8-1.39);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 0.84(0.6-1.17);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
15-<25;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1.18(0.86-1.63);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1.23(0.92-1.66);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.07(0.75-1.52);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
>=25;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1.56(1.16-2.09);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1.68(1.21-2.34);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.44(1.01-2.06);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
Birth year categories.
1931, 1932;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
1933, 1934;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 2.19(1.42-3.38);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 2.85(1.65-4.91);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
1935, 1936;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 3.52(2.15-5.77);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 2.9(1.76-4.78);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
1937;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 3.56(2.03-6.25);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 3.64(1.78-7.45);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
1938, 1939;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 6.4(4.05-10.09);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 3.73(2.17-6.41);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
1940, 1941;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 5.72(3.53-9.27);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 4.3(2.67-6.94);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
Health related.
Health status previous wave.
Excellent/ very good/ good;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1(1-1).
Fair/ poor;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1.45(1.04-2.03);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1.49(1.07-2.07).
Previous wave: health limits work.
No;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1(1-1).
Yes;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 2.25(1.58-3.21);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1.96(1.43-2.67);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.71(1.18-2.48);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1.72(1.2-2.45).
Previous wave: retiree health insurance[B].
No;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1(1-1).
Yes;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 2.09(1.66-2.64);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1.76(1.43-2.17);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1.86(1.49-2.34);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 2.39(1.82-3.14).
Pension related.
Prior wave DB pension type of R or S [B];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
No DB;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
DB pension;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1.28(1.02-1.61);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): [Empty];
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): [Empty].
Prior wave DC pension type of R or S[B].
No DC;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 1(1-1);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 1(1-1).
DC pension;
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Male (N=2462): 0.53(0.43-0.67);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 62: Female (N=1954): 0.63(0.45-0.87);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Male (N=1640): 0.65(0.52-0.81);
Adjusted odds ratios (and 95 percent confidence intervals): For full
retirement before age 65: Female (N=1511): 0.55(0.45-0.66).
Source: GAO analysis of RAND HRS data.
[A] Respondent's earned income adjusted for inflation:
[B] R= respondent; S= Spouse:
Notes: The model for male retirement before age 65 includes both
education and income. We recognize that education and income have the
potential for being highly correlated. However, that does not appear to
be the case for this age group and the decision to retire before age
65. We compared the odds ratios in Table 9 to those in the adjusted
model in Table 10 and noted that they are quite stable. In addition,
both education and income are statistically significant in the
multivariate model (p-values <0.01). Therefore, we decided to keep both
education and income in the final model.
The RAND HRS data provided information about DC and DB pensions from
current employment during the 1992 through 2004 study period. It did
not provide data concerning any pensions from respondents' or spouses'
previous employers.
All models were run adjusting for income in the previous wave, birth
year, DB plan and DC plan. Only statistically significant results
(overall p-value<0.05) are presented in the table above.
[End of table]
[End of section]
Appendix III: Prior Studies on the Social Security Earnings Test:
This appendix summarizes the findings in selected studies concerning
changes in labor force participation among older workers following the
elimination of the Social Security earnings test for beneficiaries at
or above their full retirement age, effective January 1, 2000.
Jae G. Song and Joyce Manchester, "New Evidence on Earnings and Benefit
Claims Following Changes in the Retirement Earnings Test in 2000,"
Journal of Public Economics, vol. 91, nos. 3-4 (April 2007).
To examine the effect of the removal of the Social Security earnings
test, the authors used SSA administrative data known as the Continuous
Work History Sample.[Footnote 85] The authors examined these data for
the years 1996 to 2003 and restricted their sample to those who are
fully insured under Social Security. One of the limitations of these
data is that they lack information on wages, hours worked, health
status, education, and family characteristics for workers. The authors
ran two sets of regression models on the following dependent variables:
claiming Social Security benefits, work participation, and earnings.
They used a "difference in difference" approach for which they compared
treatment groups who were affected by this policy change (those turning
65 and those aged 65 to 69) with control groups that were not affected
(those aged 62 to 64 and 70 to 72). One of the key assumptions the
authors make in running these models is that there was no shock other
than the earnings test removal in 2000 that affected treatment groups
relative to the control groups. After running these models, the authors
concluded that: 1) earnings increased among higher income workers; 2)
workforce participation increased among those aged 65 to 69; 3)
applications for Social Security benefits among those aged 65 to 69
increased following the test's removal.
Leora Friedberg and Anthony Webb, "Persistence in Labor Supply and the
Response to the Social Security Earnings Test," Working Paper 2006-27
(Boston, Mass.: Center for Retirement Research at Boston College,
December 2006).
The authors used data from the HRS and Current Population Survey (CPS)
to examine the impact on labor supply of changes made to the earnings
test in 1996 and 2000.[Footnote 86] They examine everyone in the CPS
aged 55 to 74 between the years 1992 and 2005, and they use several
different birth cohorts from the HRS in their analysis. The authors ran
regressions on several dependent variables--employment, full-time
employment, and earnings. In their regression analysis, the authors
focus on those aged 62 to 74 to capture any effect that the earnings
test might have on younger workers. Two key assumptions the authors
make are that people view the earnings test as a tax instead of a
deferral of benefits and that people can choose the number of hours
they work. The authors conclude that the earnings test changes in both
1996 and 2000 increased labor force participation for those both aged
65 to 69 along with younger workers who are anticipating its removal.
They also found that earnings increased, particularly for higher-income
workers, following the 2000 change.
Steven J. Haider and David S. Loughran, "The Effect of the Social
Security Earnings Test on Male Labor Supply: New Evidence from Survey
and Administrative Data" (Forthcoming, Journal of Human Resources:
2007).
The authors use data from the CPS, New Beneficiary Data System (NBDS),
and the Social Security Benefit and Earnings Public Use File
(BEPUF).[Footnote 87] The authors restrict their analyses to men. Using
all three data sources, they conducted a "bunching analysis" to
determine the extent to which workers adjust their earnings so that
they remain just under the earnings test threshold. They found that the
age at which workers adjust their earnings has risen as the earnings
test threshold has risen. In addition, they found that the extent of
bunching is higher with the administrative data from NBDS and BEPUF.
Turning next to labor force responses from the elimination of the
earnings test, the authors use CPS and BEPUF data to run a "difference
in differences" model. They found that earnings increased among 66 to
69 year-olds along with hours worked per week.
[End of section]
Appendix IV: Demographic Characteristics of Workers with Access to
Retiree Health Insurance and DB and DC Pensions:
This appendix provides supplementary descriptive statistics concerning
the prevalence of retiree health insurance, DB, and DC pensions by
demographic group among HRS respondents or their spouses included in
our full retirement analysis sample. These respondents were born
between 1931 and 1941, had 10 years of work experience by the time they
reached age 62 and were in the labor force (working part-time or full-
time, unemployed, or partially retired) in 1992--the beginning of the
study period.
Of those in our sample with less than $10,000 in household earnings at
the beginning of the study, about 40 percent had employer-based retiree
health insurance from either their employer or their spouse's employer.
By contrast, two thirds of people in our sample whose households earned
$50,000 or more per year had access to employer-based retiree health
insurance. Similarly, we found that a greater proportion of those with
higher levels of education were eligible for employer-based retiree
health benefits. (See fig. 7.) Others have found similar relationships,
with a 2005 study finding declines in the availability of retiree
health insurance affecting those with lower levels of education,
relative to those with higher levels.[Footnote 88] Specifically, the
authors found that retirees without a college degree have experienced a
34 percent decline between 1997 and 2002 in the likelihood of having
retiree health benefits, while those with a college degree experienced
a 28 percent decline. On the other hand, those with a post-college
degree did not experience any decline in coverage. Finally, we also
found that as of the beginning of the study period a lower proportion
of Hispanics had retiree health insurance when compared to their White
or African-American counterparts.
Figure 7: Estimated Percent of Respondents with Retiree Health
Insurance by Education, Income Groups, and Race/Ethnicity:
[See PDF for image]
Source: GAO analysis of RAND HRS data.
Notes: The 95 percent confidence intervals for these estimates are
shown with "I" symbols at the top of each bar.
Overall, an estimated 55 percent of workers in our regression study
group had access to retiree health insurance in 1992 either through
their current or former employer or their spouse's current or former
employer. As we mentioned earlier, a 2006 study found that only about
one-quarter of private sector employees worked for companies that
offered retiree health insurance.
[End of figure]
As with our analysis of retiree health insurance, we found that as of
the beginning of the study period, access to particular types of
pensions varied by respondents' income and education level. (See fig.8
and fig. 9.) We found that at the beginning of the study period 28
percent of those making less than $10,000 had a DB plan while 65
percent of those making $50,000 or more had them. We also found that 40
percent of those with less than a high school degree had a DB pension
while 62 percent of those with a college degree or more advanced degree
had a DB pension. We found similar results for DC plans with a larger
proportion of those with higher income and more education having a DC
plan compared to those who did not.
Figure 8: Estimated Percent of Respondents with DB Pensions by
Education Level, Income Groups, and Race/Ethnicity:
[See PDF for image]
Source: GAO analysis of RAND HRS data.
Notes: The 95 percent confidence intervals for these estimates are with
"I" symbols at the top of each bar.
Overall, an estimated 53 percent of respondents or their spouses had a
DB plan from an employer during the study period. As we noted earlier,
from 1992 to 2004, the proportion of household heads with a DB plan
decreased from about 29 percent to 20 percent, respectively.
[End of figure]
Figure 9: Estimated Percent of Respondents with DC Pensions by
Education Level, Income Groups, and Race/Ethnicity:
[See PDF for image]
Source: GAO analysis of RAND HRS data.
Notes: The 95 percent confidence intervals for these estimates are
shown as "I" lines at the top of each bar.
Overall, an estimated 46 percent of respondents or their spouses had a
DC plan from current employment as of 1992. As noted earlier, from 1992
to 2004, the proportion of household heads with a DC plan increased
from about 28 percent to 34 percent, respectively.
[End of figure]
[End of section]
Appendix V: Comments from Department of Health and Human Services:
Office Of The Assistant Secretary For Legislation:
Department Of Health & Human Services:
Washington, D.C. 20201:
Jun 202007:
Barbara D. Bovbjerg, Director:
Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office:
Washington, D.C. 20548:
Dear Ms. Bovjerg:
Enclosed are the Department's comments on the U.S. Government
Accountability Offices (GAO) draft report entitled, "Retirement
Decisions: Federal Policies Offer Mixed Signals About When to Retired"
(GAO 07-753).
The department appreciates the opportunity to comment on this draft
before its publication.
Sincerely,
Signed by:
Vincent J. Ventimiglia:
Assistant Secretary for Legislation:
General Comment On The U.S. Government Accountability Office Draft
Report Entitled: Retirement Decisions: Federal Policies Offer Mixed
Signals About When To Retire (GAO-07-753).
HHS Comment:
In this draft report, the GAO assessed (1) the incentives federal
policies provide about when to retire, (2) recent retirement patterns
and whether there is evidence that changes in Social Security
requirements have resulted in later retirements, and (3) whether tax-
favored private retiree health insurance and pension benefits influence
when people retire.
HHS agrees with the study finding the Medicare eligibility age provides
a strong incentive for those without health insurance to remain in the
labor force until they become eligible for Medicare, as well as the
finding that the availability of employment-based retiree health
coverage strongly influences when people retire. We note that as a
Improvement, and Modernization Act of 2003 (MMA), with its incentives
for employer and union plan sponsors to continue offering retiree drug
and health coverage, employment-based retiree health coverage is likely
to continue exerting a strong influence on retirement decisions for the
foreseeable future.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
Barbara D. Bovbjerg (202) 512-7215 or bovbjergb@gao.gov:
Acknowledgments:
In addition to the contact named above, Alicia Puente Cackley,
Assistant Director; Benjamin P. Pfeiffer; Scott R. Heacock; Mary E.
Robison; Joseph Applebaum; Cynthia L. Grant; Lisa B. Mirel; Daniel A.
Schwimer; Douglas M. Sloane; Walter K. Vance; and Seyda G. Wentworth
made key contributions to this report.
[End of section]
Related GAO Products:
Employer-Sponsored Health and Retirement Benefits: Efforts to Control
Employer Costs and Implications for Workers. GAO-07-355. Washington,
D.C.: March 30, 2007.
Baby Boom Generation: Retirement of Baby Boomers Is Unlikely to
Precipitate Dramatic Decline in Market Returns, but Broader Risks
Threaten Retirement Security. GAO-06-718. Washington, D.C.: July 28,
2006.
Older Workers: Labor Can Help Employers and Employees Plan Better for
the Future. GAO-06-80. Washington, D.C.: December 5, 2005.
Redefining Retirement: Options for Older Americans. GAO-05-620T.
Washington, D.C.: April 27, 2005.
Highlights of a GAO Forum: The Federal Government's Role in Improving
Financial Literacy. GAO-05-93SP. Washington, D.C.: November 15, 2004.
Private Pensions: Participants Need Information on Risks They Face in
Managing Pension Assets at and during Retirement. GAO-03-810.
Washington, D.C.: July 29, 2003.
Retiree Health Insurance: Gaps in Coverage and Availability.
Washington, D.C.: GAO-02-178T. November 1, 2001.
Pension Plans: Characteristics of Persons in the Labor Force Without
Pension Coverage. GAO/HEHS-00-131. Washington, D.C.: August 22, 2000.
Social Security Reform: Implications of Raising the Retirement Age.
GAO/HEHS-99-112. Washington, D.C.: August 27, 1999.
Social Security Reform: Raising Retirement Ages Improves Program
Solvency but May Cause Hardship for Some. GAO/T-HEHS-98-207.
Washington, D.C.: July 15, 1998.
FOOTNOTES
[1] Types of pension plans include (1) DB plans, which provide a
guaranteed benefit generally expressed as a monthly benefit based on a
formula that generally combines salary and years of service, and (2) DC
plans, which establish individual accounts for employees to which the
employer, participants, or both make periodic contributions. DC plan
benefits are based on employer and participant contributions to and
investment returns (gains and losses) on the individual accounts.
[2] Between 2000 and 2005, for example, the labor force participation
rate for those aged 65 to 69 increased from 24.5 to 28.3 percent
according to the Bureau of Labor Statistics. See Mitra Toosi, "A New
Look at Long-Term Labor Force Projections to 2050" Monthly Labor
Review, vol. 129, no. 11 (November 2006) 27.
[3] According to SSA's trustees, a substantial increase in net
immigration would delay the exhaustion of the Social Security trust
fund by 2 years. This projection assumes, for example, that net
immigration in each year 2008 through 2016 will be 1.4 million,
compared to the estimated 2007 level of 1.075 million, including legal
and undocumented immigrants.
[4] Demographers and policy makers pay close attention to the elderly
dependency ratio as well as the total dependency ratio (including both
the elderly and children as dependents) as these can be important
factors influencing trends in the quality of life. For example, the
numbers of workers and retirees have implications for the financing of
social insurance programs. In 2006 current workers' and their
employers' contributions represented 113 percent of Social Security
expenditures. The principal sources of Medicare funding are current
workers' and their employers' contributions (44 percent of Medicare
expenditures in 2006), premiums (12 percent), and general revenue (42
percent).
[5] Nicole Maestas, "Back to Work: Expectations and Realizations of
Work After Retirement," Working Paper WR-196-1 (RAND Corporation,
August 2005).
[6] While partial retirement can refer to workers who have reduced
hours or changed jobs, phased retirement refers specifically to workers
who reduce their hours at their existing (previous full-time) job.
[7] We use definitions of full and partial retirement developed by
RAND's HRS researchers. If a respondent identifies himself or herself
as retired and works for pay less than 35 hours per week or less than
36 weeks per year, they are classified as partially retired. For
details, see appendix I.
[8] This decline reflects, in part, the adoption of age 62 as Social
Security's early eligibility age in 1956 for women and 1961 for men and
increases in the level of benefits during this period.
[9] These data are from Social Security's Annual Statistical Supplement
for 2006. Data from 1997-2005 include conversions from nondisabled
widow(er)'s benefits to higher retired-worker benefits.
[10] Ruth Helman, Jack VanDerhei, and Craig Copeland, "The Retirement
System in Transition: The 2007 Retirement Confidence Survey," Issue
Brief No. 304 (Washington, D.C.: Employee Benefit Research Institute,
April 2007) 12.
[11] According to the Social Security and Medicare trustees, the annual
cost of Social Security benefits represented 4.2 percent of GDP in 2006
and is projected to be 6.3 percent of GDP in 2081. Meanwhile,
Medicare's annual costs were 3.1 percent of GDP in 2006; they are
projected to exceed 11 percent of GDP in 2081.
[12] GAO, Older Workers: Labor Can Help Employers and Employees Plan
Better for the Future, GAO-06-80 (Washington, D.C.: Dec. 5, 2006) 20-
22.
[13] Helman, VanDerhei, and Copeland, "The 2007 Retirement Confidence
Survey."
[14] Medicare is available at earlier ages for disability insured
workers who have end stage renal disease, and Social Security or
Railroad Retirement disability beneficiaries after a 2-year waiting
period.
[15] SSA reduces retired-worker benefits by 5/9 of 1 percent per month
for the first 36 months and 5/12 of 1 percent for each additional month
that a worker elects to start benefits in advance of full retirement
age. Conversely, delayed retirement credits increase benefits for each
month a worker delays the start of benefits after full retirement age
until they reach age 70. The factor used to calculate these credits
varies by birth year. For workers born 1943 or later the increase is 2/
3 of 1 percent each month (8 percent per year).
[16] This is the case if lifetime benefits are calculated on a present
value basis with a discount rate equal to the expected return for the
Social Security trust fund--a projected 2.9 percent above inflation
after 2015, according to the intermediate assumptions in the trustees'
2007 report--The Board of Trustees, Federal Old-Age and Survivors
Insurance and Federal Disability Insurance Trust Funds, The 2007 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors
Insurance and Disability Insurance Trust Funds (Washington, D.C.:, Apr.
23, 2007) 94.
[17] In addition, people who have cut back on work or otherwise need to
supplement their income may also be better off receiving reduced
benefits at 62 if they have retirement savings on which they expect a
relatively high rate of return. The return on one's savings must exceed
the increase in benefits one would receive for waiting to start drawing
benefits later.
[18] As noted earlier, in the context of the Social Security program a
retired person refers to someone who has started drawing retired worker
benefits.
[19] A worker eligible for both retired worker benefits and disability
benefits would typically receive a higher benefit as a disabled
beneficiary than as a retired worker beneficiary drawing benefits
reduced for early retirement. Low-income people with low net worth may
also seek Supplemental Security Income. The Congressional Budget Office
projects that an increase in the SSA's early eligibility retirement age
from age 62 to age 65 phased in over the 2023 to 2040 period would
result in an increase in the 75-year present value deficit equal to
0.06 percent of taxable payroll. Increasing the early eligibility age
can result in increases in the number of disability beneficiaries.
[20] The amount of survivor benefit ranges from 50 to 67 percent of the
combined benefits received by the couple. The closer their earnings,
the larger the drop will be at widowhood. Widow or widower's benefits
also depend on the age at which he or she starts drawing survivor
benefits. Divorced spouses, children, and dependent parents may also be
entitled to the same survivor benefits.
[21] Data from SSA show in 2004 about 4 percent of married women 65 and
older lived below the poverty line. But among widowed women in that age
group, the poverty rate was approximately 15 percent. Poverty rates for
elderly women who were divorcees or never married were 21 percent.
[22] The annual exempt amount is pegged to increases in the average
wage. When beneficiaries reach the calendar year, but not the month, of
their full retirement age, the reduction is $1 for every $3 above
$34,440 in 2007.
[23] Recomputed benefits at full retirement age may be even higher if
the earnings between 62 and the full retirement age are high enough to
increase the "highest 35 years" used in calculating a worker's benefit
amount. For a discussion of perceptions that the earnings test is a tax
on work, see for example, Jonathan Gruber and Peter Orszag, "What to do
about the Social Security Earnings Test?" An Issue in Brief July 1999,
no. 1 (Boston, Mass.: Center for Retirement Research at Boston College,
July 1999) and Liqun Liu and Andrew J. Rettenmaier, "Work and
Retirement," Policy Backgrounder no. 162 (Dallas, Tex.: National Center
for Policy Analysis, November 2006) 4.
[24] This is especially true for people whose mortality risk is higher
than average or people who are risk-averse, i.e. value the certainty of
a dollar today more than the promise of a larger amount in the future.
[25] On the other hand, delayed retirement credits continue to provide
an incentive for some workers to defer the start of benefits. As noted
above, up until they reach age 70, workers receive an increase in the
benefit amount for each month they wait to start receiving benefits.
[26] People younger than 65 are eligible for Medicare if they meet
certain conditions: workers who have end stage renal disease, and
Social Security or Railroad Retirement disability beneficiaries after a
2-year waiting period. Because the program does not cover all medical
expenses or the cost of most long-term care, many Medicare
beneficiaries supplement their Medicare coverage with other types of
insurance, such as private Medicare supplemental plans.
[27] A person may purchase continued health insurance coverage after
leaving his or her employer, under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability
and Accountability Act (HIPAA). With COBRA, continuation of coverage is
generally available for a period of at least 18 months. Such coverage
can be prohibitively expensive, as the retiree may be required to cover
the entire premium. Once COBRA or other continuation coverage has been
exhausted, HIPAA may enable a person to purchase individual coverage
without regard to pre-existing medical conditions.
[28] Individuals who have health insurance through a spouse or other
family members may not face the same incentives.
[29] TIAA-CREF Institute, The Retiree Health Care Challenge (Prepared
by Hewitt Associates, November 2006).
[30] Thomas Buchmueller, Richard W. Johnson, and Anthony T. Lo Sasso,
"Trends in Retiree Health Insurance, 1997-2003," Health Affairs, vol.
25, no. 6 (2006) 1507-1516.
[31] Richard W. Johnson and Rudolph G. Penner, "Will Health Care Costs
Erode Retirement Security?" Issue in Brief, No. 23 (Boston, Mass:
Center for Retirement Research at Boston College, October 2004).
[32] In addition, since workers contact SSA to apply for Medicare, some
who had not already done so may choose to apply for Social Security
benefits at the same time.
[33] Tax-qualified pensions receive preferential tax treatment in
exchange for satisfying certain requirements established in the
Internal Revenue Code (employers receive a current deduction on
contributions they make to qualified plans within certain limits).
Under current law, there are a number of requirements that private
pension plans must satisfy, including contribution, benefit, and
vesting requirements. Qualified plans include, for example, 401(k),
403(b), 457, and qualified employee annuity plans.
[34] Or the 5th anniversary of plan entry if a participant entered
within 5 years of NRA.
[35] On May 22, 2007, the Treasury Department issued final regulations
under the Internal Revenue Code, permitting distributions to be made
from a pension plan upon the attainment of the plan's NRA, but stating
that the plan cannot set an NRA that is earlier than the typical
retirement age for the industry in which the covered workforce is
employed. The regulations provide a safe harbor of age 62 or above (age
50 or above when substantially all the participants in the plan are
public safety employees). See "Distributions From a Pension Plan Upon
Attainment of Normal Retirement Age," 72 Fed. Reg. 28604 (May 22,
2007).
[36] In 2003, an estimated three-quarters of workers with private
sector DB plans, had plans providing early retirement at age 55 or
earlier. U.S. Bureau of Labor Statistics, National Compensation Survey:
Employee Benefits in Private Industry in the United States, 2003,
Bulletin 2577, October 2005.
[37] Exceptions to this rule apply in cases where a plan participant
continues to work for an employer that maintains a plan allowing
distributions to begin by April 1 of the calendar year after the year
in which the worker retires.
[38] In these cases distributions may be lump sums or other payments.
In addition, an employee may receive distributions from a multiemployer
or union plan as long as the employee no longer works for any of the
participating employers.
[39] This must be in the form of a series of substantially equal
periodic payments and must be for the participant's life or life
expectancy or the participant's and his or her spouse's joint life
expectancy. Other exceptions to the tax penalty for claiming before 59
˝ include rollovers to IRAs or other pensions, and cases of total and
permanent disability, and death.
[40] Internal Revenue Service, Pension and Annuity Income, Publication
575, cat. no. 15142B, 2006, 31.
[41] A cash balance plan, a type of hybrid plan, is legally classified
as a DB plan because participants' benefits are determined by a benefit
formula. However, cash balance plans have certain features, such as
hypothetical "individual accounts," that make it resemble a DC plan.
However, changes in the value of investments do not directly affect the
benefits available to participants.
[42] Both DB and DC pension holders face risks. For example, workers
with a 401(k) plan face the risk that the value of their account may
decline during the additional year of work even if the balance is
invested entirely in bonds. In addition to the risk of default, the
value of bonds falls when interest rates rise. Should a worker with a
401(k) choose to purchase a fixed annuity, they also face a risk that
the amount of the annuity they receive may decline over the year. The
annual income from a fixed immediate annuity generally declines when
interest rates decline. Both DB and DC plan holders typically face a
risk that an increase in inflation will diminish the purchasing power
of their pension over time. Instead of purchasing an annuity providing
a flat benefit, a DC pension holder could purchase annuities that
provide an increase by a set rate, such as 3 percent per year, to
compensate for anticipated inflation, but the initial amount of the
annuity payments would be lower. Annuities that are fully adjusted for
inflation are not widely available in the U.S. In contrast, DB pension
holders face some risk that their employer may not be able to fulfill
its pension commitment. In DB plans, investment risks rest with the
employer or plan sponsor and benefits are, within limits, insured by
the Pension Benefit Guaranty Corporation (PBGC). For discussion of the
PBGC's role in insuring DB pensions see GAO, Answers to Key Questions
about Private Pensions Plans, GAO-02-745-SP (Washington, D.C.: Sept.
18, 2002) and GAO, Private Pensions: The Pension Benefit Guaranty
Corporation and Long-Term Budgetary Challenges, GAO-05-772T
(Washington, D.C.: June 9, 2005).
[43] Abbigail J. Chiodo and Michael T. Owyang, "Putting Off Retirement:
The Rise of the 401(k)" National Economic Trends (St. Louis, Missouri:
Federal Reserve Bank of St Louis, March 2002).
[44] In 2003 an estimated 23 percent of private sector workers with DB
pensions had plans that were also integrated plans, i.e. they take into
account Social Security benefits received by workers.
[45] According to the 2003 National Compensation Survey, an estimated
14 percent of private sector workers participating in a DB plan have an
age of 60 or less or no age requirement, and another 9 percent have a
retirement age of 62. An estimated 20 percent of those with DB plans
face maximum benefits provisions that cap the number of years of
service in the benefit formula. Researchers studying pensions held by
older workers concluded that most of those participating in DB plans
faced decreasing lifetime benefits for additional years of work
beginning about age 60. These estimates of negative accruals were based
on analysis using a 3 percent real discount rate. See Leora Friedberg
and Anthony Webb, "Retirement and the Evolution of Pension Structure,"
NBER Working Paper No. 9999 (Cambridge, Mass.: National Bureau of
Economic Research, September 2003).
[46] 72 Fed. Reg. 28604 (May 22, 2007); see also the Pension Protection
Act of 2006, Pub. L. No. 109-280, § 905, providing for distributions to
employees who have reached age 62 and have not separated from
employment.
[47] Because of the recent changes in the Social Security earnings
test, people at or above their full retirement age can also receive
full social security benefits together with their paycheck and
pensions.
[48] Although tax law generally permits non-hardship in-service
distributions from qualified DC plans without tax penalty beginning at
age 59 ˝, plan administrators have the option to make them available or
not. A 2006 survey of plans by the Profit Sharing/401(k) Council of
America indicated that a majority of responding plans made them
available and nearly three quarters of them did so for participants
over age 59 ˝.
[49] Eligibility for reduced retired worker benefits begins the first
full calendar month in which eligible workers are age 62. Benefits for
that month are paid during the following month. If, for example, a
worker's 62nd birthday is January 5, his or her first month of
eligibility will be February, and he or she will receive the first
check in March.
[50] These descriptive statistics are for HRS respondents born 1931 to
1941 who had worked at least 10 years by the time they reached age 62.
Some workers leave retirement and return to the work force.
[51] Mark Duggan, Perry Singleton, and Jae Song, "Aching to Retire? The
Rise in the Full Retirement Age and Its Impact on the Disability
Rolls," Working Paper #11811 (Cambridge, Mass.: National Bureau of
Economic Research, December 2005).
[52] This analysis focused on men; results for women were not provided.
[53] Generally workers are eligible to draw benefits at age 62 and 1
month. However, workers born on the first or second day of the month
are eligible at 62 and 0 months. Recent analysis by Social Security
researchers identified similar declines at age 62 following the rise in
the full retirement age. Jae G. Song and Joyce Manchester, "Have People
Delayed Claiming Retirement Benefits? Responses to Changes in Social
Security Rules," Paper prepared for the International Social Security
Association Research Conference, March 2007, Warsaw (Washington, D.C.:
Social Security Administration, Division of Economic Research: December
2006).
[54] Employee Benefit Research Institute and Mathew Greenwald &
Associates, Inc., "2007 Retirement Confidence Survey Fact Sheet:
Attitudes About Social Security and Medicare," Employee Benefit
Research Institute, April 2007, 2.
[55] For people who reached their full retirement age in 2000 or later,
the age at which they start drawing benefits may also have been
affected by the elimination of the earnings test, as described below.
[56] The estimated proportion of workers taking benefits at the full
retirement age has, however, declined somewhat from 17 percent to 13
percent for workers born in 1935 and 1940 respectively.
[57] The proportion of 66 year-olds in the workforce increased from 34
percent in 2000 to 38 in 2004. The proportion of 67 year-olds increased
from 35 to 39 percent. By assessing the proportion of 66 and 67 year-
olds in the workforce between 2000 and 2004, we are limiting the number
of birth year cohorts we can examine because not all of the birth
cohorts had reached these ages between 2000 and 2004. For example, only
four and three of the 10 birth cohorts in the HRS had reached the ages
of 66 and 67 respectively, in 2000.
[58] Jae G. Song and Joyce Manchester, "New Evidence on Earnings and
Benefit Claims Following Changes in the Retirement Earnings Test in
2000," Journal of Public Economics vol. 91, nos. 3-4, April 2007.
[59] Leora Friedberg and Anthony Webb, "Persistence in Labor Supply and
the Response to the Social Security Earnings Test," Working Paper 2006-
27 (Boston, Mass.: Center for Retirement Research at Boston College,
December 2006).
[60] Steven J. Haider and David S. Loughran, "The Effect of the Social
Security Earnings Test on Male Labor Supply: New Evidence from Survey
and Administrative Data" (Forthcoming, Journal of Human Resources,
2007).
[61] Pierre-Carl Michaud and Arthur Van Soest, "How did the Elimination
of the Earnings Test above the Normal Retirement Age affect Retirement
Expectations?" RAND Working Paper 478 (RAND Corporation, January 2007).
[62] Friedberg and Webb (2006) found an increase among those in the
60th - 80th percentiles. Song and Manchester (2007) found an increase
among those in the 50th - 80th percentiles.
[63] To analyze the relative likelihood of retiring we used a subset of
HRS workers who were either in the labor force or partially retired at
the beginning of the study in 1992. See appendix I for complete
description of our sample selection criteria.
[64] For convenience we use the terms "more likely" or "less likely" to
refer to adjusted odds ratios above or below 1, respectively. See
appendix I for details.
[65] The income measure in our analysis was limited to the respondent's
earnings (including wages, salary, and bonuses from employment or self-
employment), but not his or her spouse's income. This income measure
excludes other types of income such as interest, dividends, and rent.
[66] We did not find a statistically significant relationship between
DB pensions and women's retirement age.
[67] In the earlier years of the HRS, respondents were asked if they
had any type of health insurance coverage obtained through their or
their spouses' or partners' employer, former employer or union. If they
indicated having such coverage, they were asked whether the health
insurance plan was available to people who retire. In later years of
the study respondents were asked about whether they had employer-
sponsored retiree health insurance until the age of 65.
[68] David M. Linsenmeier, "Do Retiree Health Benefits Cause Early
Retirement?" Working Paper 22 (Princeton, NJ: Princeton University
Center for Health and Wellness, November 2002). In this study, the
author used the same dataset and birth year cohorts that we are using
in our analysis. But he used the first five waves of the data set and
respondents were included in the analysis if they were working and had
health insurance at the beginning of the study period.
[69] Employee Benefit Research Institute and Matthew Greenwald
Associates Inc., Health Confidence Survey (2003).
[70] Our analysis may underestimate the effect of health limitations on
early retirement. As detailed in appendix I, the sample used in our
regression had a greater proportion of those in better health than the
nationally representative sample from which it was drawn.
[71] We studied the type of pension held by either the respondent or
the spouse from employment during the study period. Our analysis did
not include information about pensions from previous employment. We
compared the likelihood of retiring before age 62 for those that had a
DB plan with the likelihood for those without a DB plan. Those with a
DB plan may have also had a DC plan. Those without a DB plan may have
had a DC plan or no pension plan. Similarly, in our analysis of DC
plans, we grouped respondents with both DB and DC plans along with
those who reported having only a DC plan.
[72] We recognize that some physically demanding jobs, such as
firefighters and police officers, often offer DB plans. The final model
for men less than 62 also included a variable indicating if the
respondent's health limited their ability to work. Our model does not
attempt to explain the causality of the retirement decision, but is
intended to note associations with the retirement decision, in this
case both health limitations and DB plans are associated with the
decision to retire, among other factors.
[73] DC pensions may not have been as important to the older members of
our sample, as 401(k) plans began in the early 1980s. The oldest
members of our sample were in their early fifties at this time and did
not have much time to accumulate a large balance in such accounts.
[74] Alicia H. Munnell, Kevin E. Cahill, and Natalia A. Jivan, "How has
the Shift to 401(K)s Affected the Retirement Age?" Issue Brief No. 13
(Boston, Mass.: Center for Retirement Research at Boston College,
September 2003).
[75] Friedberg and Webb.
[76] The HRS is sponsored by the National Institute of Aging (grant
number NIA U01AG009740) and is conducted by the University of Michigan.
[77] There are five cohorts in the HRS: the AHEAD cohort, those born
before 1924; the Children of the Depression cohort, those born 1924-
1930; the original HRS cohort born between 1931 and 1941, the War Baby
cohort, those born between 1942-1947; and the Early Baby Boomer Cohort,
those born 1948-1953. The original HRS cohort respondents entered the
study in 1992 and are interviewed every 2 years.
[78] Respondents in the workforce in 1992 were those who worked full-
time, worked part-time or were unemployed (not working, but seeking
work). In addition for our analysis of full retirement we included
respondents classified as partially retired.
[79] We excluded these groups in part in order to be able to analyze
the timing of workers' retirements in relation to their pre-retirement
characteristics.
[80] The HRS is a sample of the non institutionalized (community-based)
population in the contiguous United States.
[81] While the larger HRS data set does have links to restricted SSA
earnings data and some pension information from employers, we were not
able to utilize these sources of information.
[82] Wan He, Victoria Velkoff, and Kimberly DeBarros, 65+ in the U.S.:
2005 , Current Population Reports, P23-209 (Washington, D.C.: U.S.
Census Bureau, December 2005).
[83] GAO-06-80, 41-43.
[84] This includes the respondent's earnings (including wages, salary,
and bonuses from employment or self-employment), but not their spouse's
income. It excludes other types of income such as interest, dividends,
and rent.
[85] This data set is a 1 percent sample of SSA beneficiaries that has
information on earnings and the claiming of Social Security benefits.
[86] In 1996, legislation was passed which raised the earnings test
threshold.
[87] The NBDS is a sample of Social Security beneficiaries who first
received Old Age, Survivors, and Disability Insurance benefits between
mid-1980 and mid-1981, who were interviewed by SSA in 1982 and 1991.
The BEPUF is nationally representative of Social Security beneficiaries
who were entitled to these benefits in 2004.
[88] Paul Fronstin, "The Impact of the Erosion of Retiree Health
Benefits on Workers and Retirees," Issue Brief No. 279 (Washington,
D.C.: Employee Benefit Research Institute, March 2005).
[89] Our analysis of income was limited to a respondent's earned
income, including wages, salaries, and bonuses from employment or self-
employment. It excluded their spouse's income and unearned income such
as interest, dividends, and rent.
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