Background Information

OVERVIEW

Although many American workers are postponing retirement and remaining in the labor force until older ages, a major exception to this general pattern is career public sector employees. These workers continue to retire from public sector employment at young ages, often in their mid-50s. One reason public sector employees retire earlier is the design of the defined benefit pension plans and the incentives embedded in these plans. Individuals who leave their career jobs at young ages must manage their resources for longer retirement periods. This is even more important given increases in life expectancy, which leads to more years spent in retirement if work life is not extended to older ages. Longer retirement periods not only impose more burdens on workers to plan and save, but they also raise the cost to governments of providing any given level of retirement benefits to public employees.

RESEARCH QUESTIONS

This project seeks to examine the transition into retirement among public employees through three integrated research questions. The first question will consider how individuals prepare for this transition through saving for retirement. The second research question planned for this study is how individuals determine their optimal retirement age from career employment. Retirement benefits provide incentives to leave public employment at certain ages and/or after long employment tenures, which may artificially alter workers' retirement ages. The third research question will investigate retirees' choice of annuity payment options, as well as how annuity option choices, in both defined benefit and defined contribution plans, may influence workers' economic well-being in retirement. In related analyses, researchers will seek to explore how retiring workers decide whether to move from public employment into complete retirement or to prolong their working life, either continuously or after a short interlude, by seeking post-retirement employment elsewhere.