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Retirement incentives and behavior of private and public sector workers

Published online by Cambridge University Press:  12 February 2020

Courtney Coile  and
Susan Stewart
Courtney Coile*
Affiliation:
Wellesley College, Wellesley, MA, USA NBER, Cambridge, MA, USA
Susan Stewart
Affiliation:
NBER, Cambridge, MA, USA
*
*Corresponding author. Email: [email protected]
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Abstract

Over the past several decades, private sector workers in the USA with employed-sponsored pensions have experienced a dramatic shift from defined benefit (DB) to defined contribution plans, while this trend has been less pronounced for public sector workers. In this paper, we use data from the Health and Retirement Study to explore changes in the retirement incentives and retirement behavior of public and private sector workers over the past quarter-century. We find that both groups have become less likely to report having a DB pension or any pension. Compared to their private sector counterparts, public sector workers have a higher level of retirement wealth and a larger financial gain from continued work at older ages, and these differences by sector are growing across cohorts. Both groups respond to financial incentives in making retirement decisions. However, growing differences by sector in the gain to continued work do not appear to have translated into diverging retirement behavior, as we observe similar trends in the two groups.

Keywords

Pensionsprivate sectorpublic sectorretirementretirement incentives

JEL classification

J32: Nonwage Labor Costs and Benefits • Retirement Plans • Private Pensions J14: Economics of the Elderly • Economics of the Handicapped • Non-Labor Market Discrimination J26: Retirement • Retirement Policies
Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Special Issue 3: Retirement Decisions in a Changing Labor Market , July 2021 , pp. 393 - 409
Copyright
© The Author(s), 2020. Published by Cambridge University Press

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