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Undergraduate Economic Review

Abstract

This is a study of people’s retirement timing under defined benefit pension plans (DB plans). The actuarial structure of DB pensions generally creates strong incentive for people to stay with their employers, at least to their early retirement ages, not to retire beforehand. Upon tracking respondents covered by DB plans in the Wave I (1992 cohort) of the Health and Retirement Study (HRS) until they left their 1992 employers, we found that a significant percentage of people (about 17%) left their jobs prior to their early retirement ages. Why did people leave prematurely? Several possible hypotheses were considered and examined. Through simple tabulation analyses, we found that workers in the early-leaving group tend to have significantly smaller pension benefits and significantly poorer knowledge about their pensions. The impact of self-reported health status and early retirement windows were not evident. Logistic regressions showed that conditional on age dummies, pension size, and having basic pension knowledge was strongly negatively correlated to premature departure. Both excellent and poor health statuses correlate positively with early departure. Accepting an early-out window also had a significantly positive correlation with early departure.

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