Working Paper: NBER ID: w23551
Authors: Shanthi Ramnath; John B. Shoven; Sita Nataraj Slavov
Abstract: We examine the role of self-employment in retirement transitions using a panel of administrative tax data. We find that the hazard of self-employment increases at popular retirement ages associated with Social Security eligibility, particularly for those with greater retirement wealth. Late-career transitions to self-employment are associated with a larger drop in income than similar mid-career transitions. Data from the Health and Retirement Study suggest that hours worked also fall upon switching to self-employment. These results suggest that self-employment at older ages may serve as a “bridge job,” allowing workers to gradually reduce hours and earnings along the pathway to retirement.
Keywords: self-employment; retirement transitions; social security
JEL Codes: H55; J26; J29
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher retirement wealth (G51) | Increases the probability of transitioning from wage employment to self-employment (J68) |
| Late-career transitions from wage employment to self-employment (J26) | Larger drop in income compared to mid-career transitions (J62) |
| Self-employment may allow individuals to gradually reduce their working hours and earnings (J26) | Transition to retirement (J26) |
| Claiming social security at key ages (62 and full retirement age) (H55) | Increases the probability of transitioning from wage employment to self-employment (J68) |