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Key Findings Details

Macroeconomic Determinants of Retirement Timing
by Yuriy Gorodnichenko, Jae Song and Dmitriy Stolyarov
WP 2013-281
  • We find a general decline in full employment of older workers during 1960-1990; older workers are increasingly exiting career jobs to work in lower-paying “bridge jobs.”
  • The full-time employment rate has stayed relatively stable for the bottom 80 percent of earners since 1990. Workers with the lowest earnings have the lowest full employment rate: only 40 percent of 60 year olds and 20 percent of 65 year olds are employed full time. However, 65-67 year old workers with the highest lifetime earnings not only have a higher full employment rate, but it is also increasing.
  • We find robust evidence that flows from full employment to both partial and full retirement rise significantly in recessions.  When the unemployment rate is high, partially retired workers younger than 63 tend to stay partially retired while those older than 63 tend to choose full retirement.
  • High inflation is associated with exit from the labor force through partial and full retirement. However, housing prices do not have a significant effect on retirement timing.
  • The impact of the unemployment rate and inflation on retirement decisions is quite similar for workers of all lifetime earnings levels, with wealthier individuals being only somewhat less impacted.