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Retirement choices by state and local public sector employees: the role of eligibility and financial incentives

Published online by Cambridge University Press:  28 January 2019

Leslie E. Papke*
Affiliation:
Department of Economics, Michigan State University, 486 West Circle Drive, East Lansing, MI 48824
*
*Corresponding author. Email: papke@msu.edu

Abstract

I analyze the effects of state public pension parameters on the retirement of public employees. Using a panel data set of public sector workers from 12 waves of the Health and Retirement Study, I model the probability of retirement as a function of pension wealth at early and normal retirement eligibility and Social Security coverage in the public sector job. I find that becoming eligible for early retirement, or receiving an early-out offer, significantly increases the probability of retiring. I do not find any effect of retirement wealth levels. These findings suggest that state legislative action to affect retirement decisions and reduce future pension costs would be most effective operating through plan eligibility rules and early-out incentives.

Type
Article
Copyright
Copyright © Cambridge University Press 2019 

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