Skip to content
Elder Law Prof Blog
Katherine C. Pearson, Editor, and a Member of the Law Professor Blogs Network on LexBlog.com

Longevity & Retirement Plans?

By rmorgan

I frequently post about reports from the Center for Retirement Research at Boston College. (In my opinion, their research is on the cutting edge and really informs those of us teaching in elder law).  They’ve started 2014 with another important working paper (2014-1), How Do Subjective Longevity Expectations Influence Retirement Plans?

Here’s the abstract for the report:

Increasing life expectancy has made working longer both more necessary and more possible, but the relationship between an individual’s survival expectations and his planned retirement age is unclear in the existing literature. This study uses the Health and Retirement Study and an instrumental variables (IV) approach to examine how subjective life expectancy influences planned retirement ages and expectations of working at older ages, and how individuals update those expectations when they receive new information. The estimates in this paper suggest a large and statistically significant relationship between subjective life expectancy and retirement expectations: a one-standard-deviation increase in optimism about living to ages 75 or 85 is associated with an 8-percent to 24-percent increase over the mean probability of working at these ages. Actual retirement behavior also increases with subjective life expectancy, but the relationship is somewhat weaker. Our IV estimates using parents’ longevity as instruments are largely consistent with our reduced form estimates, strengthening the conclusion that subjective life expectancy impacts both retirement planning and actual retirement behaviors. Finally, we find that increases over time in subjective life expectancy are associated with increases in the probability of planning to work at ages 62 and 65. The results further our understanding of how survival and retirement expectations are “anchored” to the previous generation’s experience and suggest how targeted efforts at increasing knowledge about rising life expectancy may increase the proportion of younger cohorts who decide to work longer.

The conclusion offers several takeaways, some of which I paraphrase below:

  • As we live longer, we will work longer-either because we need the money or because we can.
  • There is a “statistically significant relationship between an individual’s subjective life expectancy and his expectations of when he’ll retire.”
  • When something happens to change a person’s view of her life expectancy, there is a corresponding impact on her retirement plans.
  • This will have a significant impact on projections regarding the work force.

The two page executive summary hits the highlights, if you don’t want to use the entire report, and can be accessed here.