Inconsistent Retirement Timing

Abstract

We study the effect of inconsistent time preferences on actual and planned retirement timing decisions in two independent datasets. Theory predicts that hyperbolic time preferences can lead to dynamically inconsistent retirement timing. In an online experiment with more than 2,000 participants, we find that timeinconsistent participants retire on average 1.75 years earlier than time-consistent participants do. The planned retirement age of non-retired participants decreases with age. This negative age effect is about twice as strong among time-inconsistent participants. The temptation of early retirement seems to rise in the final years of approaching retirement. Consequently, time-inconsistent participants have a higher probability of regretting their retirement decision. We find similar results for a representative household survey (German SAVE panel). Using smoking behavior and overdraft usage as time preference proxies, we confirm that timeinconsistent participants retire earlier and that non-retirees reduce their planned retirement age within the panel.

What Motivates Social Security Claiming Age Intentions? Testing Behaviorally Informed Interventions Alongside Individual Differences

“…We find the same pattern across our studies. Given that younger people might consider their intended claiming age as a proxy for their retirement age, these findings are consistent with prior work that demonstrates that people decrease their planned age as they near retirement age (Merkle, Schreiber, and Weber 2022). Thus, our results are best interpreted in terms of differences between treatments and correlations with individual differences, not in terms of absolute levels of claiming age.…”