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Key Findings Details

Health Insurance and Retirement Decisions
by John Karl Scholz and Ananth Seshadri
WP 2013-292
  • We develop a rich life-cycle model of optimal consumption and retirement decisions where the stock of health affects utility and longevity and is influenced by one’s health insurance status.
  • Some households respond to shortfalls in retirement wealth by working longer than originally anticipated or investing less in health.
  • Households facing a delay in the availability of post-retirement health insurance find it attractive work longer and to invest more in their health.
  • While very adverse health shocks can lead to retirement well before age 62, we find that around 85% of early retirees at age 62 are in good health.
  • Also, the availability of post-retirement health insurance induces households to retire about 3 months earlier than their counterparts without such insurance.