Working Paper: NBER ID: w22609
Authors: Frank N. Caliendo; Maria Casanova; Aspen Gorry; Sita Slavov
Abstract: Uncertainty about the timing of retirement is a major financial risk with implications for decision making and welfare over the life cycle. We estimate that the standard deviation of the difference between retirement expectations and actual retirement dates ranges from 4.28 to 6.92 years. We develop a quantitative model to assess the impact of this risk. Individuals would give up 2.6%-5.7% of total lifetime consumption to fully insure this risk and 1.9%-4.0% of lifetime consumption simply to know their actual retirement date at age 23. While social insurance programs could be designed to hedge this risk, current programs in the U.S. (OASI and SSDI) provide very little timing insurance.
Keywords: retirement timing uncertainty; social insurance; welfare costs; quantitative model
JEL Codes: C61; E21; H55; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| retirement timing uncertainty (J26) | lifetime consumption willingness to give up (D15) |
| retirement timing uncertainty (J26) | timing premium (C41) |
| retirement timing uncertainty (J26) | welfare costs (I30) |
| social insurance programs (H55) | retirement timing uncertainty (J26) |
| social insurance programs (H55) | welfare costs (I30) |