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Retirement timing uncertainty: Empirical evidence and quantitative evaluation - ScienceDirect
Source: sciencedirect.com
Article summary:
1. This article explores the measurement and quantitative impact of retirement timing uncertainty.
2. It establishes a set of facts concerning the extent of retirement timing uncertainty, develops an analytical framework for assessing its role in retirement planning, and quantifies the welfare cost for individuals who do not make optimal financial planning decisions.
3. The article finds that retirement timing uncertainty ranges from 3 to 6 years, depending on the subsample considered, and that less than 30% of retirees retire due to poor health or disability, unexpected changes in wages, or job loss.
Article analysis:
The article is generally reliable and trustworthy as it provides evidence-based insights into the measurement and quantitative impact of retirement timing uncertainty. The authors use data from the Health and Retirement Study (HRS) to establish a set of facts concerning the extent of retirement timing uncertainty, develop an analytical framework for assessing its role in retirement planning, and quantify the welfare cost for individuals who do not make optimal financial planning decisions. The authors also provide evidence that less than 30% of retirees retire due to poor health or disability, unexpected changes in wages, or job loss.
However, there are some potential biases in the article which should be noted. For example, while the authors provide evidence that most early retirements may be explained by “idiosyncratic, hard-to-measure factors” they do not explore these factors further or provide any evidence for their claims about them. Additionally, while they discuss how individuals may lack necessary financial literacy to optimally make complex financial decisions they do not explore this issue further or consider possible solutions such as providing more education on financial literacy topics. Finally, while they discuss how individuals may fail to hedge against retirement timing risk they do not explore possible solutions such as providing more guidance on how to hedge against this risk.