Framing and retirement age: The gap between willingness-to-accept and willingness-to-pay

In a large online experiment, we relate the retirement timing decision to the disparity between the willingness-to-accept (WTA) and the willingness-to-pay (WTP). In the WTP treatment, participants indicate the maximum amount of monthly benefits they are willing to give up to retire early. In the WTA treatment, the minimum increase of monthly payments to delay retirement is elicited. Our results reveal that the framing of the decision problem strongly influences participants' reservation price for early retirement. The WTA for early retirement is more than twice as high as the corresponding WTP. Using actual values from the German social security system as market prices, we demonstrate that the presentation in a WTA frame can induce early retirement. In this frame, the implicit probability of retiring early increases by 30 percentage points. We further show that the disparity between WTA and WTP is correlated with loss aversion. Repeating the analysis with data from a representative household survey (German SAVE panel), we find similar results.