The labor force participation of elderly men was decreasing during most of the 20th century. For example, France saw one of the most dramatic declines: the labor force participation rate of men in their early 60s dropped from close to 40% in 1980 to almost 10% in 1998. However, beginning in the mid-1990s, many countries saw a steady increase in the labor force participation of their elderly population. From 1998 to 2014, France experienced a 16% increase in the labor force participation rate of men aged 60–64. Some countries saw an even bigger increase. The Netherlands reached the nadir in 1993 when the labor force participation of elderly men in their early 60s dropped to 20%, and by 2014, it has increased by 44%. The participation of elderly women has also increased and to an even larger degree than men for many countries, but it lacks the U-shaped pattern that characterizes the experience of men. The increasing participation of the elderly in the workforce is undeniable, and for many countries this recent trend could not have come at a more crucial time. Facing an aging population with rising life expectancy, many countries are worried about the fiscal sustainability of programs such as social security. With the elderly working longer, these fiscal pressures are undoubtedly relaxed. Therefore, it is important to understand the root causes of the increase in the labor force participation of the elderly. If certain policy reforms can encourage the elderly who can work to keep working, then implementing them will mitigate the demographic burden that many countries grapple with. Social Security Programs and Retirement Around the World: Working Longer documents the increasing trend in labor force participation among older individuals and explores its possible causes. This book stems from the ambitious effort of the NBER International Social Security project to conduct cross-country analysis on how social security programs affect the labor force participation of older individuals. One of their latest projects – which culminated into this book – examines the trends in labor force participation rates among the elderly in the last two decades for 12 countries. Each chapter focuses on the experience of one country and is cogently written by researchers in that country. To make coherent comparisons across countries possible, all of the chapters explore the same prominent factors that potentially influence retirement decisions: trends in health and education, structural changes in occupation, the macroeconomic condition, country-specific public pension reforms, and the rising participation of women in the labor force. The book suggests that there is little evidence that improvements in health and education are strong contributing factors to the increasing trend. Health of older individuals – as measured by mortality rates or self-assessments – has continuously improved for all 12 countries since 1980, but the participation rates for elderly men did not rise until the mid-1990s. Also, there is no strong evidence that countries with a larger decrease in mortality rates experienced a more dramatic increase in

This is the introduction and summary to the eighth phase of an ongoing project on Social Security Programs and Retirement Around the World. This project, which compares the experiences of a dozen developed countries, was launched in the mid 1990s following decades of decline in the labor force participation rate of older men. The first several phases of the project document that social security program provisions can create powerful incentives for retirement that are strongly correlated with the labor force behavior of older workers. Subsequent phases of the project have explored disability program provisions and their effects on retirement as well as potential obstacles to promoting work at older ages, including whether there is a link between older employment and youth unemployment and whether older individuals are healthy enough to work longer.In the two decades since the project began, the dramatic decline in men’s labor force participation has ended and been replaced by sharply rising participation rates. Older women’s participation has been rising as well. In this eighth phase of the project, we explore this phenomenon of working longer. We document trends in participation and employment and also consider factors that may help to explain these changes in behavior. We conclude that social security reforms as well as other factors such as the movement of women into the labor force have likely played an important role.

Inequality in wealth among elderly households, and in particular the prevalence of very low wealth holdings, can be an important consideration in the design of social insurance programs. This paper examines the incidence and determinants of low levels of financial and total wealth using repeated cross-sections of the Health and Retirement Study (HRS) and a small longitudinal sample of HRS respondents observed both at age 65 and shortly before death. Most of those who report very low wealth holdings at the end of their life had little wealth at the traditional retirement age of 65. There is strong persistence over time in reports of very low wealth, and more generally relatively little evidence that wealth is drawn down in the first 15 years of retirement. The age-specific probability of reporting low wealth increases slowly after age 65. Low lifetime earnings are strongly predictive of low wealth at retirement and at the end of life. The post-retirement onset of a major medical condition, and, for married women, the loss of their spouse, are both associated with small increases in the probability of reporting very low wealth, but they account for a small fraction of low-wealth outcomes. Low levels of wealth accumulation before age 65, rather than gaps in the safety net after 65 or rapid spend-down of accumulated assets, appear to be the primary determinant of low levels of wealth just before death.

Education is strongly related to participation in the Social Security Disability Insurance (DI) program. To explore this relationship, we describe the correlation between education and DI participation, and then explore how four factors related to education – health, wealth, occupation, and employment – feature in this correlation. We label these four factors “pathway” variables. We find that a large component of the relationship between education and DI participation – more than one-third for men, and over two-thirds for women – can be attributed to the correlation of education with health, and of health with DI receipt. We use data from the Health and Retirement Study for the 1992-2012 period to explore the corresponding roles for each of the pathway variables, and also to study how changes over time in these variables, such as the widening gap between the health status of those with high and low educational attainment, have affected DI participation.

While research shows that there are large gains in lifetime wealth from delaying claiming Social Security, most people claim at or before full retirement age. We fielded an original, nationally representative survey to gain insight into people’s rationales for their Social Security claiming decisions, their satisfaction with their past claiming decisions, and how they financed any gap between retirement and claiming. Common rationales for claiming Social Security before full retirement age include stopping work, liquidity, poor health, and concerns about future benefit cuts due to policy changes. Claiming upon stopping work and claiming at full retirement age appear to be viewed as social norms. But while Social Security claiming is strongly associated with stopping work, the roughly quarter of the sample who have a gap of two or more years between retirement and claiming used employer-sponsored pensions and other saving to finance the delay. Individuals who claimed at full retirement age are more satisfied with their claiming decisions than individuals who claimed early or delayed. There is little evidence that claiming decisions and rationales for claiming are correlated with financial literacy or knowledge of Social Security rules.

This paper examines the correlation between poor health and asset accumulation for households in the first nine waves of the Health and Retirement Survey.Rather than enumerating the specific costs of poor health, such as out of pocket medical expenses or lost earnings, we estimate how the evolution of household assets is related to poor health.We construct a simple measure of health status based on the first principal component of HRS survey responses on self-reported health status, diagnoses, ADLs, IADL, and other indicators of underlying health.Our estimates suggest large and substantively important correlations between poor health and asset accumulation.We compare persons in each 1992 asset quintile who were in the top third of the 1992 distribution of latent health with those in the same 1992 asset quintile who were in the bottom third of the latent health distribution.By 2008, those in the top third of the health distribution had accumulated, on average, more than 50 percent more assets than those in the bottom third of the health distribution.This "asset cost of poor health" appears to be larger for persons with substantial 1992 asset balances than for those with lower balances.

Public programs that benefit older individuals, such as Social Security and Medicare, may be changed in the future in ways that reflect an expectation of longer work lives. But do older Americans have the health capacity to work longer? This paper explores this question by asking how much older individuals could work if they worked as much as those with the same mortality rate in the past or as much as their younger counterparts in similar health. Using both methods, we estimate that there is significant additional capacity to work at older ages. We also explore whether there are differences in health capacity across education groups and whether health has improved more over time for the highly educated, using education quartiles to surmount the challenge of changing levels of education over time.

This is the introduction and summary to the seventh phase of an ongoing project on Social Security Programs and Retirement Around the World. The project compares the experiences of a dozen developed countries and uses differences in their retirement program provisions to explore the effect of SS on retirement and related questions. The first three phases of this project document that: 1) incentives for retirement from SS are strongly correlated with labor force participation rates across countries; 2) within countries, workers with stronger incentives to delay retirement are more likely to do so; and 3) changes to SS could have substantial effects on labor force participation and government finances. The fourth volume explores whether higher employment among older persons might increase youth unemployment and finds no link between the two. The fifth and sixth volumes focus on the disability insurance (DI) program, finding that changes in DI participation are more closely linked to DI reforms than to changes in health and that reducing access to DI would raise labor supply. This seventh phase of the project explores whether older people are healthy enough to work longer. We use two main methods to estimate the health capacity to work, asking how much older individuals today could work if they worked as much as those with the same mortality rate in the past or as younger individuals in similar health. Both methods suggest there is significant additional health capacity to work at older ages.

The goal of this paper is to draw attention to the long lasting effect of education on economic outcomes.We use the relationship between education and two routes to early retirement -the receipt of Social Security Disability Insurance (DI) and the early claiming of Social Security retirement benefits -to illustrate the long-lasting influence of education.We find that for both men and women with less than a high school degree the median DI participation rate is 6.6 times the participation rate for those with a college degree or more.Similarly, men and women with less than a high school education are over 25 percentage points more likely to claim Social Security benefits early than those with a college degree or more.We focus on four critical "pathways" through which education may indirectly influence early retirement -health, employment, earnings, and the accumulation of assets.We find that for women health is the dominant pathway through which education influences DI participation.For men, the health, earnings, and wealth pathways are of roughly equal magnitude.For both men and women the principal channel through which education influences early Social Security claiming decisions is the earnings pathway.We also consider the direct effect of education that does not operate through these pathways.The direct effect of education is much greater for early claiming of Social Security benefits than for DI participation, accounting for 72 percent of the effect of education for men and 67 percent for women.For women the direct effect of education on DI participation is not statistically significant, suggesting that the total effect may be through the four pathways.

Health and longevity have increased substantially over the last 50 years, yet the labor force participation of older men has declined in most developed countries. We use mortality as a measure of health to assess the capacity to work at older ages in 12 OECD countries. For a given level of mortality, the employment rates of older workers vary substantially across countries and over time within countries. At each mortality rate in 2007, if American men between the ages of 55 and 69 had worked as much as American men in 1977 they would have worked an additional 3.7 years between ages 55 and 69. That is, men in this age range in 2007 would have had to work 46.8 % more to work as much as men with the same mortality worked 30 years earlier in 1977. Comparing across countries, at each mortality rate in 2007, to match the work of American men, French men for example would have to work 4.6 years more between the ages 55 to 69 than they actually did work. We also find that there is little relationship across countries between mortality improvements and the change in employment at older ages.

Delaying Social Security claiming is equivalent to buying an annuity, as individuals who delay forgo current benefits in exchange for higher monthly benefits in the future. Despite growing evidence that this annuity is offered on extremely generous terms, the majority of people claim well before age 70. In addition, many people offered a choice between a lump sum and annuity payout from their defined benefit pension choose the lump sum even though it is typically actuarially disadvantageous. We present new evidence, based on an original survey, on why people claim Social Security early, how satisfied they are ex post with their claiming decision, and how well they understood Social Security’s rules at the time of claiming. Our survey also provides insight into defined benefit payout choices by asking people about these choices as well as their motivations for choosing a lump sum over an annuity. We find that the most common reasons for claiming Social Security early are a need for cash, an assumption that claiming should occur upon stopping work, and a desire to invest the money and come out ahead. For defined benefit pensions, we find that less than half of individuals who were offered a choice chose the lump sum, and among individuals who chose the lump sum, a large number rolled the money into an IRA.

We consider assets when individuals were last observed prior to death in the Health and Retirement Study (HRS) and trace assets backwards to the age when these individuals were first observed.For most individuals, assets in the last year observed (LYO) were very similar to assets in the first year observed (FYO).In particular, most of those who were last observed with very low asset levels also had low assets when first observed.We also estimate the relationship between an individual's asset change between the first and last date of observation, that individual's education and health status when first observed, and that individual's within-sample changes in health and family composition.We obtain estimates for HRS respondents who were 51 to 61 in 1992 and for AHEAD respondents who were age 70 and over in 1993.

The oldest members of the baby boom generation are now crossing the threshold of eligibility for Social Security and Medicare, with significant implications for these programs' fiscal sustainability. Yet this is just one part of the rapidly changing landscape of aging in the United States and around the world. Discoveries in the Economics of Aging assembles analyses of the most recent research in this expanding field of study. A focus of the volume is the relationship between health and financial well-being, especially as people age. The contributors explore this issue within the context of the changing demographic landscape. Other contributions discuss alternate determinants of health, including retirement, marital status, and cohabitation with family, and the potential for public policy to improve health and financial well-being.

We consider how age-health profiles differ by demographic characteristics such as education, race, and ethnicity. A key feature of the analysis is the joint estimation of health and mortality to correct for the effect of mortality selection on observed age-health profiles. The model also allows for heterogeneity in individual health at a point in time and the persistence of the unobserved component of health over time. The observed component of health is based on a multidimensional index based on 27 indicators of health. Most of the key results are shown by simulations that illustrate the range of issues that can be addressed using the model. Differences in health by education and racial-ethnic group at age 50 persist throughout the remainder of life. Based on observed profiles, the health of whites is about 8 percentile points greater than the health of blacks at age 50 but by age 90 the gap is only 5 percentile points. However, when corrected for mortality selection, the health of blacks is actually declining more rapidly with age than the health of whites; the true gap widens with age. We also find that much of the difference in age-health profiles by racial-ethnic group is accounted for by differences in the levels of education between race-ethnic groups--from two-thirds to 85 percent for men and about half for women. We also simulate differences in survival probabilities by level of education and health and use these probabilities to calculate the expected present discounted value (EPDV) of an immediate annuity with first payout at age 66 for persons by gender, level of education, and health decile. The range of EPDVs is over two-fold for both men and women suggesting enormous potential for adverse selection.

This is the introduction and summary to the sixth phase of an ongoing project on Social Security Programs and Retirement Around the World. The first phase described the retirement incentives inherent in plan provisions and documented the strong relationship across countries between social security incentives to retire and the proportion of older persons out of the labor force. The second phase documented the large effects that changing plan provisions would have on the labor force participation of older workers. The third phase demonstrated the consequent fiscal implications that extending labor force participation would have on net program costs--reducing government social security benefit payments and increasing government tax revenues. The fourth phase presented analyses of the relationship between the labor force participation of older persons and the labor force participation of younger persons in twelve countries. We found no evidence that increasing the employment of older persons will reduce the employment opportunities of youth and no evidence that increasing the employment of older persons will increase the unemployment of youth. The fifth phase on Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms was intended to set the stage for this current phase.This sixth phase of the ongoing ISS project is particularly related to the fifth phase (Wise, 2012) and the second phase (Gruber and Wise, 2004) of the project. This volume continues the focus of the previous volume on DI programs while extending the methodology to study retirement behavior used in the second phase to focus in particular on the effects of the DI programs. The key question this volume seeks to address is: given health status, to what extent are differences in labor force participation across countries determined by the provisions of disability insurance programs?

Personal retirement accounts (PRAs), especially 401(k) plans, have become an increasingly important mode of retirement saving. This paper provides new evidence on the effect of the recent financial crisis, and the associated decline in employment, on PRA saving. We particularly examine how these effects vary across demographic groups. We explore how crisis-related changes in employment and earnings affected PRA balances. We do this by estimating the effect of the crisis on these outcomes and then by considering how PRA ownership and balances depend on employment and earnings as well as other covariates. To assess the effect of the crisis we estimate the relationship between age (and other covariates) and the labor market and PRA outcomes in years prior to the crisis (2004-2006) and then estimate how these relationships change during the crisis period (2008-2010). We find very few statistically significant differences in the parameter estimates for the pre-crisis and the crisis periods. We use the model to predict age profiles of employment rates, earnings given employment, PRA ownership, and PRA balances given ownership in the pre-crisis and crisis periods. We give special attention to the relationship between education and PRA ownership and balances.

The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 54 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 through 64. Coverage that includes an employer contribution is associated with a 6.3 percentage point (36.2 percent) increase in the probability of turnover at age 62, a 7.7 percentage point (48.8 percent) increase in the probability of turnover at age 63, and a 5.5 percentage point (38.0 percent) increase in the probability of turnover at age 64. Conditional on working at age 57, such coverage reduces the expected retirement age by almost three months and reduces the total number of person-years worked between ages 58 and 64 by 5.6 percent.