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Essay on Does Early Retirement Mean Early Death
Until 1961 social security benefits from the retirement fund could not begin for men until they reached age 65. In 1961 the age for initial receipt of benefits was decreased from 65 to 62. However, 65 was still taken to be the age of normal retirement, and early retirees between the ages of 62 and 64 had their benefits reduced by what was supposed to be an actuarially fair amount. While some debate has arisen over whether the reduction was actuarially fair or whether the social security retirement benefit formula gave a large incentive for continued work over the 62-64 age range, the data on labor force participation among males do demonstrate a clear decrease after 1963.
The labor force participation rates for 63-year-old men decreased from 75.5 to 52.8 percent over the seventeen-year period from 1963 through 1979. Additional evidence is provided by Diamond and Hausman, who estimated a model of retirement behavior. (Diamond & Hausman 97-132) Their empirical results indicate that approximately 50 percent of retirements of men aged 62 through 64 would not have occurred in 1966-74 if early retirement benefits had not been available.
In spite of the trend toward early retirement, low income and low wealth are common among retired workers. Diamond and Hausman, using data from the National Longitudinal Survey of Older Men (NLS), found that a significant proportion of newly retired or soon-to-retire men had little financial wealth in absolute terms or in relation to their permanent income. (Diamond & Hausman 81-114) In 1966 they found that 20 percent of the survey respondents, who were men between 45 and 59, had wealth of less than $1,000. This percentage rises to 50 percent when financial wealth in houses is eliminated from the measure of total financial wealth. An alternative measure that estimates the ratio of financial wealth to permanent income demonstrates this same low level of wealth......
