| Abstract: |
Recent advances in behavioral decision research, behavioral economics, and
life-span development psychology provide leverage for expanding our
understanding of the decision to retire earlier versus later. This report
examines how cognitive abilities, perceptions about the future, and other
psychological characteristics affect retirement decisions. We use existing and
new data collected through the RAND-USC American Life Panel, including
detailed assessments of fluid and crystallized intelligence, financial
literacy, expectations for the future, future time perspective, and maximizing
versus satisficing decision styles. We find those with high levels of
cognitive ability are more likely to retire later, as are those with greater
longevity expectations. We also find those with lower cognitive ability have
less coherent expectations of retirement—suggesting a need for planning
assistance. We also find expectation of lower Social Security benefits is
associated with plans to retire later—contrary to our hypothesis that such
expectation might spur early retirement in an effort to lock in benefits.
Finally, we find that tendencies maximize (versus satisfice) had mixed effects
on retirement decision making, with different aspects of maximizing tendencies
showing different relationships with retirement decision making. Future work
should expand these data in a targeted direction. Recent research notes that
decision-making competence can be improved with training, and to the extent
this trainability extends to older adults, decision skills may be a useful
target for intervention. Stronger longitudinal design and analysis can also
help demonstrate possible endogenities between retirement and psychological
variables. |