Working Paper: NBER ID: w12386
Authors: Jeffrey R. Brown; Courtney C. Coile; Scott J. Weisbenner
Abstract: This paper uses the receipt of an inheritance to measure the effect of wealth shocks on retirement. Using the Health and Retirement Study (HRS), we first document that inheritance receipt is common among older workers - one in five households receives an inheritance over an eight-year period, with a median value of about $30,000. We find that inheritance receipt is associated with a significant increase in the probability of retirement. In particular, we find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period. Importantly, this effect is stronger when the inheritance is unexpected and thus more likely to represent an exogenous shock to wealth.
Keywords: inheritance; retirement; wealth shocks
JEL Codes: J14; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Receiving an inheritance (D14) | Increases the probability of retirement (J26) |
| Unexpected inheritances (D14) | Increases the probability of retirement (J26) |
| Increasing the inheritance value by $100,000 (D15) | Increases the probability of retirement (J26) |