Stated Preference Analysis of Full and Partial Retirement in the United States

Abstract

In the traditional retirement scenario, individuals work full-time until a given age and then stop working abruptly. In the alternative partial retirement scenario, individuals work part-time for several years before they stop working. For the individual, partial retirement provides a smooth transition to full-retirement where they gradually adjust to a possibly lower income and more leisure time in full-retirement, and for the economy, it is a potential policy tool to keep people employed longer. The models developed to explain the retirement decisions of older workers are typically estimated using data on actual retirement behavior, from which it is difficult to identify the retirement options available to employees. In particular, employers often do not provide partial retirement opportunities. In this paper, we use stated preference data to identify the preferences of individuals for full and partial retirement plans. We consider a choice set of hypothetical full and partial retirement plans and ask the respondents of a survey representative for the US population of ages 40 and over to choose their favorite plan. We analyze how the choices vary with financial incentives and other factors.

Keywords: Older workers, gradual retirement, field experiment

JEL Classification: C35, C93, D04, D91, J14, J22, J26