Heath and Aging

Growing Older in America: The Health and Retirement Study

Chapter 2: Work and Retirement

Attitudes, expectations, and behaviors related to work and retirement have changed considerably over the past half century. In 1950, the average man retiring at age 65 could expect to live another 13 years, and a 65-year-old woman another 15 years. Today, men average an additional 17 years and women another 20 years beyond what we think of as the typical retirement age. With such improvements in health and longevity, people might have been expected to work longer and retire later. Instead, the opposite trend unfolded.

Between the 1950s and the mid-1980s, participation of older men in the labor force declined at a notable rate as more and more men opted for retirement before the standard age of 65. This decline leveled off after the mid-1980s and, since 1990, labor force participation rates for older men have increased slightly. The story for older women reflects two complementary trends. Proportionally more women of all ages are working in the formal labor market, and labor force participation rates for women over age 60 (especially those in the 60 to 64 age range) have also risen significantly during the past 20 years.

The Health and Retirement Study delves deeply into the work and retirement of older Americans. This chapter discusses HRS findings about labor force participation and the nature of work among older adults, factors that contribute to people's decisions to retire, the consumption of goods and services with age, and attitudes about retirement. It also looks at retirement incentives in pension programs and the knowledge that people have about their retirement plans.


HRS data show that people are ready to retire in their early to mid-60s, but retirement trends are changing, with older adults increasingly interested in part-time opportunities and other activities to stay busy and productive with age:

  • Although retirement rates rise steeply at the Social Security eligibility ages of 62 and 65, many older people do remain in the workforce, either full-time or part-time. In their 50s, most men (70 percent) and a majority of women (60 percent) work. By age 65, employment rates among men and women are half of what they were for workers a decade younger.
  • Most people are happy and active in retirement. Some 61 percent of retirees surveyed in 2000 say they found the retirement transition to be "very satisfying." One-third of retirees reported moderate satisfaction, and only 7 percent reported that their retirement was not satisfying.
  • Baby boomers are expecting to work longer, perhaps presaging a reversal in the century-long trend toward earlier retirement. Compared with 1992, in 2004, a substantially larger proportion of people in their early to mid-50s expected to work after 65.
  • The structure and availability of pensions strongly influence the decision about when to retire. The expansion of defined-contribution plans and decline of defined-benefit plans over the past 20 years may be playing a role in ending the trend toward earlier retirement. A study using HRS data finds that people with defined-benefit plans (usually including retirement incentives, lifelong benefits, and reduced pension investment risk) retire on average 1.3 years earlier than those with defined-contribution plans such as 401(k)s.
  • Health problems can have a big influence on the decision to retire early. One analysis of HRS data suggests that poor health is a stronger influence than financial variables on people's decisions to retire. Poor health is cited as being very important in the decision to retire for 35 percent of people ages 55 to 59, but considerably less so among those 60 and older.
  • Married couples tend to make retirement decisions jointly, even when that means one will continue to work. One study using four waves of HRS data found that people are less likely to retire if their spouses are still working than if their spouses have already retired. However, if one spouse retires for health reasons, the other spouse is less likely to retire than if the spouse has voluntarily retired.


The majority of both men (70 percent) and women (60 percent) in their 50s work, mostly on a full-time basis. After age 62 -- the age of initial eligibility for Social Security benefits -- labor force activity declines (Figure 2-1). By age 65, male and female labor force participation is close to half of what it was for people in their 50s. The nature of work changes with age as well. By age 65, more than half of working women are employed in part-time as opposed to full-time positions. For both genders, part-time employment forms the lion's share of total employment for people age 70 and older.

In 2002, married HRS participants were significantly more likely to be working than were their non-married counterparts. Conversely, unmarried individuals were more likely to be retired, although the difference between married and unmarried men is fairly small (56.9 percent and 53.2 percent, respectively) (Table 2-1). Married people were less likely than unmarried people to report themselves as disabled, which may partially account for the continued participation of married people in the workforce at most ages.

Figure 2-1 depicts work status in a single year, 2002. While the overall trend is indicative of the HRS population, the declining sample size of workers as age increases produces the peaks and valleys seen at certain ages. Another way to portray the work/retirement experience is to follow a single cohort of HRS participants over time (Gustman and Steinmeier 2004b). Figure 2-2 depicts the retirement pattern of a subset of the initial HRS cohort (people ages 51 to 61 in 1992) over 10 years, focusing on "career workers." To be classified as a career worker, a person must have worked full-time in at least half the years between age 40 and his or her last year of full-time work, and worked full-time in some year at or after turning age 50. The bottom segment of Figure 2-2 ("completely retired") indicates the direct flow into full retirement; this includes moving from full-time work directly into retirement, as well as moving from partial retirement into full retirement. The upper segment includes those who, during the course of the study, moved from full-time work into partial retirement and then into full-time retirement. One can see steep rises in retirement at ages 62 and 65 as individuals become eligible for early and full Social Security benefits.

FIGURE 2-1.1 FULL-TIME AND PART-TIME WORK, AGES 62-85: 2002. (percentages) -- MEN
Age Part-Time Full-Time
62 12.0 39.7
63 14.1 32.8
64 16.0 33.0
65 14.1 31.5
66 14.5 25.4
67 18.1 21.1
68 22.2 13.7
69 16.5 12.5
70 14.2 13.8
71 25.1 8.3
72 10.4 12.6
73 19.2 9.7
74 16.1 5.5
75 14.6 6.5
76 11.9 7.1
77 16.5 7.3
78 8.3 4.1
79 8.5 4.9
80 7.0 5.2
81 9.5 2.2
82 3.6 1.5
83 1.8 4.2
84 10.1 0.0
85 2.7 2.1


FIGURE 2-1.2 FULL-TIME AND PART-TIME WORK, AGES 62-85: 2002. (percentages) -- WOMEN
Age Part-Time Full-Time
62 16.2 28.1
63 17.5 23.5
64 17.7 20.4
65 16.7 12.7
66 17.2 12.9
67 13.7 10.9
68 15.7 11.4
69 10.1 9.7
70 12.4 6.8
71 10.0 6.7
72 14.9 2.4
73 8.7 4.0
74 11.1 2.5
75 5.9 1.3
76 7.5 3.7
77 3.8 0.8
78 5.8 3.4
79 3.0 1.9
80 3.2 0.6
81 1.6 0.3
82 2.2 1.6
83 3.1 0.2
84 3.1 0.4
85 3.0 0.0

Gustman and Steinmeier (2004b) also found differences in retirement ages by gender and racial/ethnic group. Figure 2-3 looks at differences between White career workers versus Black and Hispanic career workers in terms of retirement from full-time work, again using the trend data from the initial HRS cohort (people ages 51 to 61 in 1992). Except at a couple of ages, Black men are more likely than White men to be retired, with the largest difference being 7.6 percentage points at age 57. After age 59, Hispanic men, especially those in their mid-60s, are less likely than Whites to be retired. For women, there are relatively small differences in retirement levels between Blacks and Whites. Hispanic women age 55 and younger are somewhat less likely than White women to be retired from full-time work, while Hispanic women are generally more likely than White women to be retired after age 55.

TABLE 2-1 LABOR FORCE STATUS OF NOT-MARRIED AND MARRIED HRS RESPONDENTS: 2002. (percentages) Note: Columns do not add to 100 percent because more than one status is possible. For example, a respondent could be working and a homemaker.
  Men, Not Married Women, Not Married Men, Married Women, Married
Working 31.5 24.8 43.2 32.2
Retired 56.9 47.1 53.2 35.1
Disabled 12.0 9.7 7.0 5.2
Unemployed 3.5 1.8 1.8 1.6
Homemaker 0.2 22.4 0.3 32.7


Age Moved from full-time work to part-time work into full retirement during the period 1992-2002 (percent) Moved directly into full retirement during the period 1992-2002 (percent)
50 5.6 1.8
51 6.2 2.5
52 6.8 3.3
53 9.1 3.4
54 10.9 4.2
55 14.0 5.1
56 15.6 5.6
57 17.2 6.2
58 19.4 7.1
59 22.3 8.0
60 27.2 9.1
61 33.1 10.4
62 45.8 11.9
63 50.3 13.8
64 56.0 13.2
65 63.2 14.7
66 66.1 15.5
67 69.4 14.8
68 71.3 15.3
69 74.4 14.0


Age Black minus white Hispanic minus white
50 4.0 0.9
51 6.0 0.7
52 6.6 1.6
53 6.5 3.7
54 5.6 6.1
55 3.5 2.8
56 7.1 4.9
57 7.6 6.8
58 4.1 2.3
59 4.4 1.4
60 1.7 -3.6
61 2.1 -5.5
62 3.0 -7.8
63 1.0 -11.6
64 -3.6 -11.3
65 3.3 -7.7
66 2.8 -5.6
67 1.4 -2.3
68 0.2 1.0
69 -3.2 3.0


Age Black minus white Hispanic minus white
50 -0.9 -2.2
51 0.3 -2.6
52 0.8 -0.7
53 2.3 -5.0
54 2.1 0.6
55 0.1 -1.1
56 0.4 3.5
57 -0.9 7.7
58 0.7 6.1
59 0.5 1.7
60 2.8 -2.9
61 1.5 -2.9
62 2.6 4.5
63 2.6 5.4
64 -2.1 -2.7
65 -2.7 4.0
66 2.4 3.7
67 -1.1 8.3
68 -1.8 4.9
69 2.4 11.2

Note: A positive difference indicates that Black or Hispanic respondents are more likely than White respondents to be fully retired at a given age. A negative difference indicates that Black or Hispanic respondents are less likely than White respondents to be fully retired.
Source: Gustman and Steinmeier 2004b.


The American workplace has changed substantially over the past 15 years. Studies have shown that work relies increasingly on computer and people skills in a growing service economy, and that fewer and fewer jobs require considerable physical strength. HRS data reflect this decline: in 1998, 34 percent of 51- to 56-year-olds reported that their jobs required lots of physical effort, down from 39 percent among the same age group in 1992. However, in 2002, some 30 percent of workers ages 55 to 79 still reported doing "lots of physical effort" and 14 percent said their jobs required lifting heavy loads (Table 2-2).

Older employed workers felt that good eyesight and people skills were key requirements for performing their jobs, but they differed dramatically by age in viewing computer skills as a requirement for work. Fifty-three percent of workers ages 55 to 59, but only 17 percent of workers age 75 and older, reported that their jobs required computer use all or most of the time.

TABLE 2-2 JOB REQUIREMENTS OF EMPLOYED RESPONDENTS, BY AGE: 2002. (Percent reporting that "My job requires X all of the time or most of the time")
  55-59 60-64 65-69 70-74 75-79 80+
Lots of physical effort 30 33 29 27 28 23
Lifting heavy loads 14 13 11 8 10 10
Stooping, kneeling or crouching 27 24 21 17 17 11
Good eyesight 89 87 90 87 87 90
Intense concentration 81 81 80 76 80 81
People skills 88 87 87 81 79 81
Computer use 53 45 29 23 17 17


TABLE 2-3 JOB CHARACTERISTICS OF EMPLOYED RESPONDENTS, BY AGE: 2002. (Percent reporting that they "Strongly agree or agree that...")
  55-59 60-64 65-69 70-74 75-79 80+
My job requires more difficult things than it used to 50 44 32 28 23 29
My job involves a lot of stress 61 57 41 33 28 35
Preference is given towards young workers at my job 16 16 12 8 3 5
My job pressures retirement before age 65 13 13 7 6 8 6
I would perfer to gradually reduce my hours, keeping pay the same 60 61 56 51 43 46
My job lets older workers move to less physically demanding work 37 38 39 29 34 32
I really enjoy going to work 88 90 95 96 98 96


FIGURE 2-4 STRESS ON THE JOB, BY AGE: 2002. (Percent saying that their job involves "a lot of stress")
Age Percent
55-59 60.9
60-64 56.6
65-69 41.5
70-74 32.9
75-79 28.5
80+ 35.3


Occupation Percent
Prof/Manager 30
Clerical/Sales 27
Crafts/Operatives 15
Laborers 11
Service 17

One study examining the impact of technological change on older workers found that HRS computer users were 25 percent more likely than non-users to stay in the labor force from 1992 to 1996 (Friedberg 2003). Further analysis suggested that these computer users have valuable skills that lead them to delay retirement.

The HRS also asks participants to characterize their work in terms of job difficulty, stress, preferences for hours, enjoyment, and other factors. In 2002, about half of workers in their late 50s said their jobs required "more difficult things" than in the past, while only 29 percent of people in their 80s felt that way (Table 2-3). Similarly, 61 percent of workers ages 55 to 59, compared to only 28 percent of workers ages 75 to 79 said their jobs involved "a lot of stress" (Figure 2-4). With lower degrees of perceived job difficulty and stress, despite relatively lower wages, workers over age 70 were more likely than younger workers to say that they "really enjoy going to work." However, even among pre-retirement age workers (ages 55 to 59) with the highest self-reported job stress and job difficulty, 88 percent said they enjoy their jobs.


In 2002, 30 percent of individuals who remained economically active after age 70 held professional and managerial jobs, presumably using the skills and knowledge developed during their careers. The share of workers in clerical and sales positions was only slightly less, accounting for about 27 percent of all jobs over age 70 (Figure 2-5). Another one in six (17 percent) of these older workers was in the service sector, with somewhat smaller percentages engaged as craftsmen/operatives and in manual labor.


People may change their attitudes about work and compensation as they age. According to one analysis of HRS data, older people clock fewer weeks and fewer hours than do younger workers, and median wages decline with age (Haider and Loughran 2001). To some degree, the researchers speculate, this is because older workers engage in more part-time employment than do their younger counterparts. Even among full-time workers, though, the study found a substantial drop in wages with increasing age, and wage declines occurred regardless of a person's level of education. In such cases, it appears that even the most educated workers are willing to work for relatively low wages at older ages.

FIGURE 2-6 SELF-EMPLOYMENT AMONG WORKERS, BY AGE: 2002. (Percent self-employed among persons working for pay)
Age Percent
55-59 18.2
60-64 22.6
65-69 30.4
70-74 38.8
75-79 43.1
80-84 57.8
85-89 68.0
90+ 84.8


Among workers over age 50, older people appear to have more flexible work arrangements than do younger people, as suggested by the increasing proportion with age of those who are self-employed and the significant percentage of older workers saying they could reduce their work hours if they wanted. In 2002, fewer than 20 percent of working people in their late 50s were self-employed, compared with nearly 40 percent at ages 70 to 74 and well over half of those age 80 and older (Figure 2-6). Perhaps surprisingly, a study that combined HRS data with information from the Census Bureau's ongoing Current Population Survey found that self-employed people have higher household incomes and wealth than do wage earners (Karoly and Zissimopoulos 2004). This likely reflects the fact that the latter group often has pension plans (i.e., future wealth), whereas many self-employed people accumulate retirement resources in other forms. It also is important to note that self-employed people are less likely than other workers to have health insurance.

Among people working for pay and not self-employed in 2002, the percentage who said they could reduce their working hours increased from 30 percent at ages 55 to 59 to 63 percent at ages 75 to 79. A similar but less pronounced age pattern was seen among those who wanted to increase their working hours. Whether such flexibility is necessarily to a worker's advantage or not is a more complicated issue. An analysis of 1998 HRS data found the same pattern of increasing flexibility with age, but as noted earlier, suggested that older workers may sometimes attain job flexibility at the expense of lower wages (Haider and Loughran 2001). Moreover, these data could overstate the ability of older workers to adjust their work hours if a significant proportion of workers retire at least partly because they do not have job flexibility.

The issue of flexibility in working hours is attracting considerable attention as companies and society attempt to find satisfactory accommodations for the aging labor force. Many jobs require that an individual work full-time or not at all. One recent HRS analysis looked at the effects on retirement of non-wage aspects of employment. The analysis concluded that this "minimum hour" constraint is the major firm-side factor affecting the retirement experience in America, and that it is much more important than factors such as job stress, perceived discrimination, and early retirement windows. A significant shift in employer policies regarding all-or-nothing working hours would propel major changes in the balance between partial retirement and full retirement (Gustman and Steinmeier 2004a). In anticipation of such changes, researchers are using HRS data to build models that estimate the potential impact on the Social Security system.

Another indicator of employment flexibility might be whether or not workers would consider looking into new jobs. HRS data suggest that people become less willing to explore new job opportunities as they age-often because they may risk losing their benefits. In 2000, HRS participants who worked were asked, "If you found out about another job like the one you have now, would you look into it?" Overall, three-quarters of those surveyed answered "no" or "probably not," and the percentage answering in the negative rose with age (Figure 2-7). While a "no" answer might indicate satisfaction with one's current job, analysis of the same question in earlier HRS waves indicated that a substantial percentage of respondents felt that they were locked into their current jobs because they might lose pensions or health insurance benefits if they were to change to a new employer.

FIGURE 2-7 WILLINGNESS TO CONSIDER CHANGING JOBS, BY AGE: 2000. (Percent answering "No" or "Probably not" to "If you found out about another job like the one you have now, would you look into it?")
Age Percent
50-54 67.8
55-59 69.1
60-64 81.6
65-69 82.9
70-74 81.6
75-79 84.0
80+ 89.6


FIGURE 2-8 MOTIVATIONS TO STOP WORKING BETWEEN 2000 AND 2002, BY AGE. (Percent reporting that the reason was "very important")
Age 55-59 60-64 65-69 70-74 75-79 80+
More time with family 34.31 38.12 33.50 36.92 30.58 34.36
Wanted to do other things 29.80 34.81 28.41 28.37 25.88 24.70
Poor health 34.93 29.17 28.02 19.67 20.58 10.14
Didn't like work 10.47 5.76 6.60 4.89 3.74 4.39


The availability of economic resources (discussed later in this chapter) may be paramount in the retirement transition, but there are other critical dimensions to the retirement decision and to what might be labeled "positive retirement." HRS respondents who said they were completely retired in 2002 were asked about four possible influences on their decisions to stop working: poor health, wanting to do other things, not liking their work, and wanting to spend more time with family.

More than one-third of those who retired between 2000 and 2002 said that spending more time with their families was a very important reason for retirement, and roughly one-fourth also cited "wanting to do other things." Poor health was a very important factor for 35 percent of retirees in the 55 to 59 age category, but the importance of poor health as a motivating factor for retirement dropped consistently with increasing age (Figure 2-8). In keeping with findings noted earlier in this chapter about enjoyment of work, fewer than10 percent of respondents were motivated to retire by a strong dislike of their work.

As more and more women enter the workforce, researchers have become interested in how retirement incentives interact in two-earner families. Johnson et al. (2000) used four waves of HRS data to describe the joint retirement decisions of husbands and wives. They found that people were less likely to retire if their spouses were still working than if their spouses had already retired. If one spouse had stopped working involuntarily because of health problems, though, the other spouse was less likely to retire than if the spouse had voluntarily retired.

Using HRS data from 1992 to 2000 along with linked pension information, Coile (2003b) argues that women are highly influenced by their own economic incentives when making retirement decisions and are not simply following the leads of their husbands. Gustman and Steinmeier (2002b), looking at the value that respondents placed on joint leisure time, found that this measure accounted for much of the household interdependence in retirement decisions.

Another factor that may influence people's retirement decisions is involuntary job loss. Past research on the effects of job loss often excluded consideration of older workers, because it was difficult to distinguish between "normal" retirement and job displacement. HRS data afford the possibility to track transitions into and out of the labor force. A multi-wave study of such transitions among older workers found large and persistent effects of job loss on the likelihood of future employment (Chan and Huff Stevens 2001). Looking at people 2 years after they lost a job at age 55, labor force participation rates were 60 percent for men and 55 percent for women, compared with more than 80 percent for people who had not suffered job displacement. Four years after a job loss, there was still a gap of about 20 percent between the displaced and nondisplaced groups.


Many studies have explored the relationship between health and retirement, but they often have differed in their conclusions as to whether health or financial variables are more important in the decision to retire. Some of the difference is attributed to problems with correctly measuring health status and some to the belief that individuals may report poor health as a justification for early retirement. One analysis of early HRS data (McGarry 2002) found that subjective reports of health more strongly influence the transition to retirement than do financial variables. Poor health was strongly correlated with the decision to leave the labor force. These important but basically unsettled questions about health reasons versus financial reasons for retirement are the subject of continuing research.


HRS data have been used to probe the complex relationship between health insurance and retirement behavior. For example, HRS data have proven valuable in simulating the impact of raising the age of Medicare eligibility as one measure for maintaining the solvency of Medicare, the Federal health insurance program for people age 65 and older. One analysis implied that increasing the Medicare eligibility age from 65 to 67 would reduce overall retirement rates by less than 5 percent (Johnson 2001). Approaching the issue from a different angle, other research concluded that expanding the Medicare program to cover people ages 62 to 64 would result in a modest increase (7 percent) in the retirement rate among workers who currently lack employer-sponsored health benefits (Johnson et al. 2003). These intriguing findings open the door to additional studies in this arena.

Researchers have employed HRS data to examine other aspects of the role of health insurance in retirement decisions. These studies generally reach the same conclusion-that health insurance costs discourage retirement, but only modestly. For example, Blau and Gilleskie (2003) found that health insurance costs have a relatively small impact on labor force participation at older ages, at least among men. One important factor is whether or not an individual's employer-provided health insurance coverage continues after he or she leaves the job. HRS data also show that workers whose coverage continues are more apt to leave the labor force early (e.g., at age 62) than are workers whose health insurance is "tied" to actually being employed (French and Jones 2004).


Another important use of HRS data has been to estimate the economic impact of particular diseases in terms of workforce participation and early retirement. For example, a study that followed diabetics in the original (1992) HRS cohort over an 8-year period revealed major income and productivity losses associated with the disease (Vijan et al. 2004). Extrapolating results to the national level, the researchers estimated that the total income loss for those who were disabled at baseline was already an incremental $60 billion relative to people without diabetes. Over the 8-year study period, individuals disabled by diabetes lost another $15 billion in productivity. Further, the diabetes-related increase in incident risk of disability, mortality, sick days, and retirement led to $59 billion in lost productivity over the same period. The study authors note that, with the rising incidence of diabetes in the United States, future losses in workforce participation from diabetes are likely to be even greater.


Two studies comparing HRS data with data from the 1970s show how the timing of retirement has shifted over the past 30 years (Gustman et al. 1995; Gustman and Steinmeier 2001). The fraction of workers in the HRS leaving the labor force at age 65 is half as large as studies in the 1970s indicated, while the proportion leaving at age 62 is twice as large. These studies have raised interesting questions about the meaning and definition of retirement. For example, the age of retirement was found to be higher if it is based on the age at which people report themselves to be completely or partially retired, rather than on hours or weeks of work. HRS analyses are part of a growing body of research seeking to characterize the influence that public and private pension policies, both in the United States and abroad, may have on the retirement decisions of millions of individuals.

One innovative aspect of the HRS involves asking participants about matters such as life expectancy, bequests, and future work plans. For the most part, people's expectations in these areas align with what eventually happens. For example, HRS data show a strong relationship between measures of expected retirement and actual retirement. Perhaps, these data suggest, measures of retirement expectations are a useful policy barometer for future behavior. Further, different groups' expectations about working past age 65 may be changing (Figure 2-9). People ages 51 to 56 with different levels of education were asked at three time points about the chances that they would be working full-time after reaching age 65. The results suggest that an increasing proportion of people in their early to mid-50s expect to be working full-time after age 65. The differences between 1992 and 2004 are striking, and the highest levels are generally seen among those who have attended or graduated from college.

  Male Female
1992 29.5 19.1
1998 32.7 22.1
2004 37.4 33.7


FIGURE 2-9.2 EXPECTATION OF WORKING FULL-TIME AFTER AGE 65, BY EDUCATION: RESPONDENTS AGES 51-56 IN 1992, 1998, AND 2004. (Percent expecting to work after age 65) -- HIGH SCHOOL DEGREE
  Male Female
1992 25.1 21.7
1998 28.1 21.2
2004 36.9 32.4


FIGURE 2-9.3 EXPECTATION OF WORKING FULL-TIME AFTER AGE 65, BY EDUCATION: RESPONDENTS AGES 51-56 IN 1992, 1998, AND 2004. (Percent expecting to work after age 65) -- SOME COLLEGE
  Male Female
1992 32.4 23.8
1998 31.0 27.1
2004 46.3 31.6


FIGURE 2-9.4 EXPECTATION OF WORKING FULL-TIME AFTER AGE 65, BY EDUCATION: RESPONDENTS AGES 51-56 IN 1992, 1998, AND 2004. (Percent expecting to work after age 65) -- COLLEGE DEGREE
  Male Female
1992 33.0 26.8
1998 39.4 27.0
2004 43.7 38.8


[Data unavailable; chart shows increasing education level for later years of birth.]

Figure 2-10 demonstrates the rise in level of educational attainment across successive cohorts of older Americans. Increased education is associated with higher lifetime earnings and wealth, longer work lives, better health, and greater cognitive capacity to deal with complexity. The upward trend in Figure 2-10 will continue, and combined with the expectations drawn in Figure 2-9, may result in a very different older workforce fabric than that seen today.


Early retirement offers influence some workers' decisions to leave the workforce before the typical retirement age of 65. However, information about the prevalence and impact of early-retirement opportunities is not generally available in national household surveys, and most of what is known to date comes from case studies of individual employers and client surveys conducted by compensation consultants. The HRS not only provides the first national data on trends in early retirement offers, but also follows workers to learn whether they go to work elsewhere or retire altogether after accepting such offers.

In 1992, HRS participants were asked if they had ever been offered an early retirement window, and during re-interviews conducted every 2 years, they were asked if they had received such an offer since the last interview. The surveys show that 15 percent of Americans ages 51 to 61 who were working in 1992 had received early retirement offers from their employers by the year 2000 (Brown 2002). The frequency of such offers appeared to peak in the mid-1990s. Just under 5 percent of workers ages 55 to 59 in 1992-1996, compared with less than 2 percent of workers in that age group in 1990 and in 2000, were offered "early-outs."

Only about one-third of early retirement offers received were accepted, and about three-fourths of those who accepted the offers said they would not have retired at that time without the special, time-limited inducements. Slightly more than half of the offers accepted included cash bonuses, and the median amount of the bonuses (in 1992 dollars) was $23,800-about $1,000 more than in rejected offers. Improved pension benefits were included in 36 percent of the accepted offers, but only in about a quarter of the rejected offers.

In general, workers who received early-out offers were better paid, were almost always covered by pension plans, and had been with their employers longer than workers who did not receive such offers. About two-thirds of workers who received an early-out offer were male, and about 40 percent were college graduates. Those receiving early-retirement offers were 12 percent less likely to be employed in 2000 than those who did not receive such offers, with the effect of reducing the 2000 employment rate of this age group by about 2 percent, according to researcher estimates. However, nearly one-third of those who accepted an early retirement offer went to work for another employer.


From the outset, the HRS has consistently shown that three out of every four older workers have said they would prefer to reduce hours gradually rather than retire abruptly. Nevertheless, the most common retirement pattern is from full-time work to complete retirement. This pattern likely results from employers' lack of flexibility about work hours (e.g., in accommodating older workers' desire to work part-time). One study followed working HRS participants for 6 years (to the ages of 57 to 67) and found that, despite the preference for gradual retirement, only 13 percent called themselves "partially retired." Approximately 45 percent reported that they had fully retired, while 42 percent reported that they had not yet retired at all. Interestingly, 17 percent of older workers said they had actually increased their work effort at some point between 1992 and 1998, although it is not known whether the additional time at work reflects an increase in hours or a return to full-time or part-time work after retirement.


The recent reversal of the trend toward early retirement is believed to be due, at least in part, to changes in retirement incentives within the Social Security program and to the elimination of mandatory retirement. Another factor may be changes in private pension plans. Over the past 20 years, defined-contribution plans such as 401(k) plans have become much more widespread. Unlike defined-benefit plans with fixed annual pension benefits, these plans do not have the built-in subsidies for early retirement.

Two studies using HRS data to assess the effect of the changing pension landscape have concluded that pension changes have indeed contributed to the reversal of the trend in early retirement. Friedberg and Webb (2003) argue that the spread of defined-contribution pension plans helps explain the increase in labor force participation among older workers, and further suggest that the median retirement age will continue to rise.

A second study looked at retirement expectations for HRS participants who were working in 1992 (Munnell et al. 2003). The expected retirement age for workers with defined-benefit pension plans was 63.9 years, compared with 65.2 years for workers with defined-contribution plans. The study authors identified two aspects of defined-benefit coverage that are responsible for this difference: pension plan characteristics and pension plan wealth. The characteristics of defined-benefit plans (e.g., early retirement incentives, lifelong benefits, and reduced investment risk) were estimated to move up a person's expected retirement date by about 8 months, and the amount of wealth in the plan moved up the expected retirement age by an additional 6 months, on average (Table 2-4). In contrast, the characteristics of defined-contribution plans were estimated to move back the expected retirement date by about 2 months, while the amount of wealth in the plan moved up the expected retirement date by about 1 month.

  No pension coverage Defined benefit pension coverage Defined contribution pension coverage
Base retirement age 65.1 65.1 65.1
Pension plan characteristics   -0.7 0.2
Pension wealth effect   -0.5 -0.1
Expected retirement age 65.1 63.9 65.2

The change in the types of pension plans adopted by employers may do more than influence the timing of retirement, however. One study using HRS data found that people with defined-benefit plans are more likely to be "very satisfied" with retirement, compared with those without such plans (Panis 2003). Moreover, retirement satisfaction among people without defined-benefit pensions tends to sour during the course of retirement, while the satisfaction among defined-benefit plan pensioners remains relatively constant (Table 2-5). People with defined-benefit plans also tend to develop depressive symptoms at a notably slower pace than those without such plans.

Years Retired 0-1 2-4 5-10 10+
Not at all satisfied 5.6 4.1 5.3 5.4
Moderately satisfied 30.5 27.3 28.5 27.3
Very satisfied 64.0 68.6 66.2 67.3


Years Retired 0-1 2-4 5-10 10+
Not at all satisfied 10.9 13.5 11.7 14.6
Moderately satisfied 31.4 32.3 36.3 38.6
Very satisfied 57.7 54.2 52.0 46.9


In the present environment of changing pension provisions and potential Social Security reform, knowledge and expectations about future public and private pension benefits have greater salience than in the past. Workers are faced with many issues and choices that have both a financial dimension (e.g., that related to financial literacy, money management, and knowledge about public and private programs) and a "future assessment" dimension (e.g., that related to expectations about survival, the need for long-term care, stock market trends, inflation, and public policies).

An early assessment of older workers' knowledge about their retirement benefits painted a very mixed picture (Ekerdt and Hackney 2002). The vast majority of HRS respondents in 1992 were aware of the eligibility ages, distributions, and investment options associated with their employer-provided pensions. When asked to project personal pension wealth, though, one-third of workers in defined-benefit plans could not estimate an expected benefit amount, while one-fifth in defined-contribution plans did not know their account balances. More than half of respondents could not estimate their expected Social Security benefit, and one in seven did not know if their health insurance continued into retirement.

A later analysis, of 1992 to 1998 HRS data, found a similar lack of knowledge among older workers about their pension plans (Gustman and Steinmeier 2004c). With HRS participants' permission, the researchers obtained Social Security Administration data about participant-specific earnings/benefits, and obtained detailed pension plan descriptions from companies offering private pensions. This information was compared with participants' self-reported knowledge of their Social Security and pension values and characteristics. Among respondents with linked pension data, only half correctly identified their pension plan type, and fewer than half correctly identified ages of eligibility within one year of the actual value. People who were close to retirement age (i.e., within 3 years) did only somewhat better at forecasting their ages of early retirement eligibility than did the sample as a whole.

Lack of knowledge appears to have real consequences. One study compared the wealth and investment patterns of people who had received financial education at work with the patterns of those who had not, finding that financial education was associated with higher savings and higher wealth (Lusardi 2004). Such findings underscore that educating people about retirement planning makes a difference in how well they plan.


Changes in the stock market can have an important impact-either positive or negative-on older workers' assets and decisions to retire, researchers tapping the HRS data have found. One study analyzed HRS data from 1992 to 2000 to estimate the effect of dramatic stock market changes on retirement (Gustman and Steinmeier 2002a). The study suggested that a stock market boom such as that experienced in the late 1990s can raise the likelihood of retirement by about 3 percentage points per year for people near retirement age, and that the effect continues for several years. On the other hand, the researchers note, a stock market collapse of similar magnitude to the boom of the 1990s would produce a roughly equivalent reaction in the opposite direction. The investigators also found that the impact of a market boom is likely to be moderated by other factors, the most important being that many people nearing retirement age have rather limited assets overall in terms of savings or defined-contribution pension wealth (see Chapter 3).

Other studies also have attempted to isolate certain effects of stock market changes on retirement behavior and well-being. One analysis compared retirement expectations as stated by HRS participants in 1992 with actual retirement behavior by the year 2000 (Coronado and Perozek 2003). After controlling for a number of intervening factors, the study concluded that the run-up in stock market prices during the 1990s induced HRS stockholders to retire about 7 months earlier than those who did not own equities. Another investigation focused on 2000 to 2002, a period when stock prices declined substantially (Kezdi and Sevak 2004). Combining HRS data with Current Population Survey data, the investigators found that households reduced their food consumption in response to the decline in wealth.


Studies in the United States and the United Kingdom have shown that reduced household spending at ages associated with retirement is greater than predicted by standard economic theory. This leads to the question of whether households realistically anticipate their retirement consumption needs or are forced to lower their living standards beyond their expectations. Using 2000 HRS data and information from a special 2001 HRS Consumption module, Hurd and Rohwedder (2004) compared expected and actual changes in spending at retirement. They found that most people expect their spending declines to be greater than they actually are (Table 2-6). In other words, people on average seem to be pleasantly surprised by their level of retirement resources, relative to pre-retirement worries about the adequacy of retirement income.

  Decrease Same Increase
Expected changes among the not retired 38.5 32.5 29.0
Actual changes among the retired 44.7 30.4 24.9


  Decrease Same Increase
Expected changes among the not retired 65.2 32.8 1.9
Actual changes among the retired 60.5 32.9 6.6


  Decrease Same Increase
Expected changes among the not retired 52.5 38.6 8.8
Actual changes among the retired 40.4 36.3 23.3


  Decrease Same Increase
Expected changes among the not retired 53.2 39.4 7.4
Actual changes among the retired 37.1 45.5 17.4


  Decrease Same Increase
Expected changes among the not retired 46.4 40.4 13.2
Actual changes among the retired 44.4 45.0 10.6


  Decrease Same Increase
Expected changes among the not retired 45.1 47.3 7.6
Actual changes among the retired 29.4 51.0 19.6


Previous studies have indicated that retired people report more loneliness and unhappiness than do people who are working. One might ask whether retirement makes people lonely and unhappy, or if people who were lonely and unhappy to begin with are more apt to retire. A study of retired male HRS participants in the mid-1990s who had not been working for at least a year showed that the latter was the case. That is, unhappy and lonely individuals were more likely than others to retire. After controlling for this predisposing condition, it turns out that retirement actually tends to make people happier and less lonely (University of Michigan 2002).

Another researcher used 2000 HRS data to gauge people's overall retirement satisfaction (Panis 2003). When retirees were asked how satisfying their retirement has turned out to be, a majority (61 percent) said "very satisfying" (Figure 2-11). One-third of respondents reported moderate satisfaction, and only 7 percent indicated that their retirement was not at all satisfying.

Very Satisfied 61%
Moderately Satisfied 32%
Not At All Satisfied 7%


Volunteer work is another important dimension of work. The HRS asks about the amount of time that respondents spend volunteering for charitable organizations. In 1998, people were asked how much time they had volunteered during the preceding 24 months. People ages 60 to 69 at the time were most likely to have engaged in volunteer service, with one in three people in that age group having done so. The proportion of respondents who volunteer declines as people reach advanced age (Figure 2-12). However, among those who do volunteer, the average number of hours increases with age. Other research using HRS data has shown that volunteer work is associated with maintaining good health (Luoh and Herzog 2002).

  51-59 60-69 70-79 80+
Average hours volunteered 110 107 128 140
Percent volunteering 26% 32% 23% 12%

Note: Average hours volunteered refers to the average among respondents who volunteered some amount of time during the reference period.

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Page Last Updated: April 1, 2014