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Does Retiree Health Insurance Encourage Early Retirement?
Steven Nyce1, Sylvester J Schieber, John B Shoven
1Towers Watson, 901 North Glebe Road #600, Arlington, VA 22203, USA.
Journal of Public Economics
|September 17, 2013
Summary
Retiree health insurance significantly encourages early retirement. Employer-sponsored health benefits allow workers to leave employment before Medicare eligibility, particularly between ages 62-64.
Area of Science:
- Health Economics
- Labor Economics
- Retirement Studies
Background:
- Employment-based health insurance in the U.S. often ties workers to jobs until Medicare eligibility at 65.
- Retiree health benefits offer an alternative, enabling earlier retirement with continuous coverage.
Purpose of the Study:
- To investigate the impact of employer-provided retiree health insurance on the timing of retirement.
- To quantify the effect of retiree health coverage on early retirement decisions.
Main Methods:
- Analysis of employee-level data from 54 diverse firms.
- Econometric analysis to assess the relationship between retiree health benefits and turnover probability.
Main Results:
- Retiree health coverage significantly increases turnover probability at ages 62, 63, and 64.
- Employer contributions to retiree health coverage show the strongest effects.
- Coverage reduces expected retirement age by nearly three months and decreases total years worked by 5.6% between ages 58-64.
Conclusions:
- Retiree health insurance is a significant factor influencing early retirement decisions.
- Employer-sponsored retiree health benefits facilitate earlier transitions out of the workforce.
- Policy implications for retirement planning and workforce dynamics.
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