The Effects of Health and Wealth Shocks on Retirement Decisions

Both health status and net worth can affect retirement decisions. In some cases, early retirement may be precipitated by a shock to an individual's health and/or economic status. The authors examine how health and wealth shocks affect retirement decisions. They use data from the Panel Study of Income Dynamics to estimate a first-differences model of health and wealth shocks on retirement over the course of the 2000s in the United States. Their results suggest that acute health shocks are associated with labor market exits for older American men but not women. These results appear particularly strong for blacks, whose labor force participation seems particularly sensitive to health status, which may be due to different occupations for blacks and whites.