1
TRAJECTORIES TO RETIREMENT:
THE ROLE OF PERSONAL TRAITS,
ATTITUDES AND EXPECTATIONS
Péter Hudomiet, Andrew Parker and Susann Rohwedder
RAND
SIEPR Conference on Working Longer and Retirement
October 8, 2015
Funded by the Alfred P. Sloan Foundation
Widespread “non-traditional” retirement
2
Labor histories of the 56-57 year old full time workers in HRS, followed for 14 years:
Full time -> retirement
Gradual retirement
Unretirement
Full time -> part time work
Always full time work
Unemployment -> retirement
Disability -> retirement
Total
N
972
360
435
358
324
47
91
2587
Percent
37.6
13.9
16.8
13.8
12.5
1.8
3.5
100.0
Large literature on timing of retirement
3

Role of incentives (Social Security, private pensions, health insurance)


Role of health


Krueger and Pischke (1992), Imbens, Rubin, and Sacerdote (2001), Sevak (2001),
Coronado and Perozek (2003), Brown et al. (2010)
Role of job characteristics


Blau and Gilleskie (2001), McGarry (2004), French (2005), Burkhauser and Cawley
(2006), Bound et al. (2010)
Role of wealth


Gustmant and Stenimeier (1986, 1994, 2000, 2004), Stock and Wise (1990), Krueger
and Pischke (1992), Gruber and Wise (1999, 2004), Blau and Gilleskie (2001, 2006,
2008), Nyce et al. (2013),
Hurd and McGarry (1993), Blekesaune and Solem (2005), Angrisani et al. (2013)
Relatively little on psychological factors

Barnes-Farrell (2003), Angrisani et al. (2013), McGonagle et al. (2015)
Literature on the role of psychological
factors in economic behavior
4

Cognition on economic outcomes
 Schooling,
job success, welfare status, child neglect,
poverty, crimes, savings, etc.
 Jensen (1998), Banks and Oldfield (2007); McArdle,
Smith and Willis (2009), Christelis, Jappelli and Padula
(2010); Grinblatt, Keloharju and Linnainmaa (2011)

Personality on economic outcomes
 Mortality,
divorce, occupations, smoking, health, wealth,
earnings, etc.
 Roberts et al. (2007), Smith (2006), Hampson et al.
(2007), Hurd et al. (2012)
How might psychological factors
impact retirement trajectories?
5
Preference examples
• Being with family
• Being productive
• Being around others
• Traveling
• Various hobbies
Life shock example
• Some take better
care of themselves
• Better health, longer
retirement
How might psychological factors
impact retirement trajectories?
6

Affecting economic opportunities
 Some
might want to…(preferences)
 keep
career job
 reduce hours on career job
 find a bridge-job
 Who
can do that?
 people

maybe relevant in career jobs?
 people


with good abilities?
with the right personalities?
maybe relevant in finding bridge-jobs?
or holding on to a career job?
In summary:
Psychological factors may affect retirement by …
7
 Making
certain workers WANT to work longer
 Making employers want to KEEP certain workers
 Making employers want to HIRE certain workers into
bridge jobs
Why study effect of psychological
factors on retirement trajectories?
8

Pre-determined variables
Cognitive abilities & personality relatively stable characteristics
 Rank-preserving decline in fluid intelligence from early
adulthood


Hard to influence by policy
If psychological factors important predictors, still of
interest to policy as it may illuminate:


Who likely responds to incentives or other policy levers
Who would benefit from what type of additional support
In this paper
9





11 waves from the Health and Retirement Study
Individuals working full-time at age 56, follow for 14
years
Construct realized retirement trajectories
Relate realized and expected retirement trajectories
to cognitive ability and personality
Investigate mechanisms through which psychological
factors shape retirement trajectories
Most closely related papers
10

Maestas (2010)
“Unretirement” is wide-spread and largely expected
 Many go through non-traditional retirement trajectories.


Angrisani et al. (2013)
Analyze 2-year labor market transitions
 Impact of personality traits and job characteristics


McGonagle et al. (2015)
Analyze perceived work ability and some labor force
outcomes
 Effect of detailed psychological and work factors

HRS DATA: Analytic sample
11



56-57 year old between 1992-1998
Full time workers at baseline
Follow them for 14 years until age 70-71
 Only
use values from these 14-year windows
 Age of interviewees by cohort and wave:
Cohort
1935-36
1937-38
1939-40
1941-42
1992 1994 1996
56-57 58-59 60-61
56-57 58-59
56-57
1998
62-63
60-61
58-59
56-57
HRS wave
2000 2002 2004
64-65 66-67 68-69
62-63 64-65 66-67
60-61 62-63 64-65
58-59 60-61 62-63
2006
70-71
68-69
66-67
64-65
2008 2010 2012
70-71
68-69 70-71
66-67 68-69 70-71
Constructing Retirement Trajectories
12
Step 1:
Assign labor market status for
each person-year observations
Step 2:
Fill in missings using job start, job
end, and retirement dates
Step 3:
Translate into retirement
trajectories
Status
Working
Not working
Code
Works full-time
F
Works part-time
Retired
Unemployed
Disabled
Dead
Other not in labor force
P
R
U
D
E
O
Missing
.
Examples of retirement trajectories:
1. FFFFRRRR
2. FFPP.RRR
3. F...RRPP
4. FPPRRRRE
5. FPPPPPPPF
6. FF..FFFFF
Realized retirement trajectories
13
Based on info between age 56 and 70
Retirement trajectory
1
2
3
4
5
6
7
8
9
10
Full time work to retirement
Gradual retirement
Unretirement
Full-time to part-time work
Always full time
Retired after unemployment
Retired after disability
Deceased by age 70
Left the sample
Other uncategorized cases
Examples
FFFPPPRR
FFFRRRPP
FFPURRRR
FFFDRRRR
FFRRRREE
12.3%
12.6%
3.2%
Less than 40% move from full-time to retirement,
About 40% move to part-time
14
Distribution of retirement trajectories, N=2,586
Full time work to retirement
Gradual retirement
Unretirement
Full-time to part-time work
Always full time work
Retired after unemployment
Retired after disability
%
37.7
13.9
16.8
13.8
12.5
1.8
3.5
Total
100.0
Trends in Retirement Trajectories
15
Add timing of retirement (early, middle, late)
Look for trends across cohorts
Find trends towards working longer:
Most notable increases in fraction …
- Working full-time past age 65, then retire
- Working full-time, then move to part-time
 Control for cohort effects
Little change in the fraction of “non-traditional” retirement
Effect of Psychological Factors
16

Cognitive abilities and Big 5 personality traits
 Most
widely used psychological factors
 We intent to expand the list of measures
Measure of Cognitive Ability
17

27 point score of working and episodic memory
 Closely
linked to fluid intelligence (Del Missier et al.,
2013)
 Sum of immediate and delayed word recall, serial 7
subtraction and backward counting

Methodology
 Age-adjusted
person specific mean values, using
responses between age 50 and 61
 Then we standardize
Big 5 Personality Traits
18

Conscientiousness


Neuroticism


needing attention and social interaction
Agreeableness


needing intellectual stimulation, change, and variety
Extraversion


experiencing the world as threatening and beyond control
Openness to experience


willingness to comply with conventional rules, norms, and standards
needing pleasant and harmonious relations with others
Methodology



26 questions asked every second wave since 2006
Use person-specific means (typically 2 values)
Then we standardize
Identification of Effects of Interest
19



Psychological factors predetermined and timeinvariant
Assume that psychological factors exogenous to all
other controls
Regression of retirement trajectories on …
 psychological
factors only
will show their total effect
 psychological
factors plus other controls
will show relevant mechanisms and
remaining effect of psych factors
Outline of regression analysis
20
𝒚𝒊 = 𝜷𝟎 +𝜷𝒑 𝒑𝒊 + 𝜷𝒙 𝒙𝒊 + 𝒖𝒊

𝑝𝑖 vector of psychological factors
 𝛽𝑝

𝑐𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑥𝑖 set of controls
 Demographics
(gender, race, education)
 Health indicators (self-reported at ages 56 and 66;
subjective probability of living to age 75)
 Labor market variables at the main job at age 56
(occupations; DB pensions, DC pensions, health insurance)
 Marital status (being single at ages 56 and 66)
 Wealth (log total household wealth)
OLS regressions of working past age 65:
High cognition, extraversion predict working longer
Agreeableness promote retiring earlier
21
[1]
0.046
-0.002
0.068
-0.058
0.009
0.020

[2]
0.042
0.003
0.066
-0.041
0.011
0.005


Cognitive ability
Neuroticism
Extraversion
Agreeableness
Conscientiousness
Openness to experience
Cohort dummies
Demographics
Health variables
Labor market variables
Marital status
Household wealth
R squared
0.030
0.038
Explained cognition
7.9%
Explained extraversion
1.6%
Explained agreeableness
30.4%
N=2,376; bold = stat. significant at 5%
[3]
0.036
0.014
0.057
-0.035
0.005
0.003



[4]
0.034
0.018
0.053
-0.033
0.015
-0.005




[5]
0.035
0.018
0.054
-0.033
0.015
-0.007





0.050
20.7%
16.1%
40.0%
0.094
24.6%
22.2%
43.9%
0.095
23.1%
20.1%
43.2%
[6]
0.037
0.018
0.054
-0.035
0.014
-0.004






0.098
18.5%
19.9%
39.8%
OLS: Working full-time past age 65
Cognition systematic predictor (+), agreeableness in [1]
Extraversion no longer significant
22
[1]
[2]
0.029 0.035
-0.008 -0.004
0.025 0.022
-0.042 -0.020
0.002 0.004
[3]
0.032
0.001
0.018
-0.018
0.002
[4]
0.032
0.006
0.015
-0.016
0.010
[5]
0.032
0.005
0.015
-0.016
0.010
[6]
0.034
0.005
0.015
-0.020
0.011
0.015
0.011
0.003
0.003
0.005














0.032
0.038
0.088
0.088






0.091
Cognitive ability
Neuroticism
Extraversion
Agreeableness
Conscientiousness
Openness to
0.026
experience
Cohort dummies

Demographics
Health variables
Labor market variables
Marital status
Household wealth
R squared
0.017
N=2,376; bold = stat. significant at 5%
Multinomial logit of retirement trajectories,
left out category: full retirement
23
Cognitive ability
Neuroticism
Extraversion
Agreeableness
Conscientiousness
Openness to experience
Cohort dummies
Demographics
Health variables
Labor market variables
Marital status
Household wealth
Gradual
retire
0.030
-0.050
0.080
-0.122
0.029
-0.029






N=2,477; bold = stat. significant at 5%
Unretire
0.125
0.130
0.231
-0.221
-0.023
0.071






Always
Full to
full-time part-time
0.308
0.221
0.004
0.063
0.263
0.320
-0.112
-0.193
0.086
0.051
0.015
-0.073












Other
0.080
0.090
0.110
0.096
-0.129
0.131






Retirement Expectations
24
Look at several measures.
Overall strongly predictive of realized retirement
trajectories, but some discrepancies.
Retirement Expectations
25
Example:
Probability of working full-time past age 65 (P65),
measured at baseline
Do psychological factors explain retirement expectations?
OLS of Expectations: work full-time past age 65
Cognition and openness significant and positive
26
[1]
0.029
-0.004
-0.015
-0.018
-0.018
Cognitive ability
Neuroticism
Extraversion
Agreeableness
Conscientiousness
Openness to
0.054
experience
Cohort dummies

Demographics
Health variables
Labor market variables
Marital status
Household wealth
R squared
0.025
[2]
0.019
-0.004
-0.013
-0.009
-0.017
[3]
[4]
[5]
[6]
0.018 0.020 0.022 0.025
-0.001 0.003 0.004 0.004
-0.016 -0.021 -0.016 -0.015
-0.008 -0.002 -0.003 -0.008
-0.016 -0.007 -0.007 -0.004
0.044
0.038
0.028
0.025
0.028














0.038
0.058
0.147
0.163






0.174
N=2,325; bold = stat. significant at 5%
Psychological Factors predict Retirement
Expectations and Realizations
27




High cognitive ability
predicts working longer in both expectations and
realizations
Extraversion
predicts working longer (part-time) in realizations, not
expectations
Agreeableness
predicts retiring earlier in realizations, not expectations.
Openness to Experience
predicts working longer in expectation, not realization
Implications
28

Psychological factors are hard to influence by policy
Because predetermined
 But they reveal important channels look at mechanisms
 May inform where policies are most effective


Retirement attitudes can be influenced
Information campaigns
 Incentives


Part-time jobs an integral part of working longer
Extraverts are successful in getting them
 How can we help introverts?
 Do they even want part-time jobs?
 Do they want different types of jobs?
 Can job matching/job exchanges help?

What are the mechanisms through which
psych. factors affect retirement trajectories?
29
So far, considering …
 Retirement
attitudes
 Job characteristics
 Health
Psychological factors strongly predict all three.
Thank you!
30
Trends in trajectories:
Some evidence for working longer
31
Cohort that turned 56 or 57 year old in year…
Full retirement, before age 62
Full retirement, age 62-65
Full retirement, age 66+
Gradual retirement, before age 65
Gradual retirement, age 66+
Unretirement, 1 wave in R
Unretirement, 2+ waves in R
Always full time work
Full-time to part-time work
Retirement after unemployment
Retirement after disability
Total
N
1992
8.0
13.0
8.3
2.6
5.9
7.5
4.3
8.4
8.7
1.2
2.6
100.0
667
1994
6.7
12.2
6.9
3.9
6.7
8.5
2.6
10.0
9.7
0.9
2.7
100.0
617
1996
6.4
11.9
8.4
4.9
6.1
8.7
4.1
7.8
10.3
2.1
2.4
100.0
632
1998
5.2
10.4
10.6
3.6
6.5
8.6
4.2
9.9
11.2
1.1
2.4
100.0
675
Subjective probabilities line up with
realized retirement trajectories
32
Probability of working full time past age 65
Full retirement, before age 62
12.1%
Full retirement, age 62-65
16.1%
Full retirement, age 66+
33.5%
Gradual retirement, bef. age 65
13.2%
Gradual retirement, age 66+
30.7%
Unretirement, 1 wave in R
29.8%
Unretirement, 2+ waves in R
14.0%
Always full time work
50.5%
Full to part time work
39.7%
Retirement after unemployment
34.0%
Retirement after disability
23.8%
29.0%
Total
Mechanism 1: Retirement attitudes
Bad things
Good things
33
Cognitive
Open to
Neurotic Extravert Agreeable Conscienti.
ability
experience
One can be own boss
One can take it easy
One can travel
No pressure
Time with spouse
Time with children
One can do hobbies
Do voluntary work
Not productive
There is sickness
No income
Boring
Miss co-workers
Inflation
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+

+
+

Mechanism 1: Retirement attitudes
34
Cognitive
Open to
Neurotic Extravert Agreeable Conscient.
ability
experience
+

Felt forced to R
Satisfied with R
Reasons for
retirement:
health issues
do other things
be with family

+
+

+

+

+
+
Mechanism 2: Health
35
Fair/Poor health at Fair/Poor health at Subj. probability
age 56
age 66
live to 75
Cognition
Neuroticism
Extraversion
Agreeableness
Conscientiousness
Openness to
experience
Cohort dummies
Demographics
R squared
-0.018
0.039
-0.035
0.027
-0.015
-0.031
0.056
-0.056
0.031
-0.051
0.013
-0.024
0.019
-0.009
0.004
0.005
0.019
0.027


0.087


0.126


0.095
N = 2,376; bold = stat. significant at 5%
Mechanism 3: Job characteristics
36
Distribution of work hours in jobs after unretirement:
• 73 % are part time jobs
Overall (in the entire sample)
• 40% of people spent time in part-time jobs
1-19 hours
20 hours
21-34 hours
35-40 hours
41+ hours
Total
N
179
51
81
67
50
427
%
42.0
11.9
18.9
15.6
11.7
100.0
Mechanism 3: Job characteristics
37
Distribution of occupations among those who take part-time jobs
• N = 1,142
• Large inflow into service sector (and sales, transportation)
• Large outflow from management, production
Management and support
Professional occupations
Sales
Office
Services
Mechanical and production
Transport, material moving
Other
Total
%
Baseline full-time job
New part-time job
18.8
12.5
20.0
18.7
12.2
14.1
13.7
14.0
10.4
16.9
12.1
7.5
7.4
9.4
5.4
7.0
100.0
100.0
Mechanism 3: Job characteristics
38
We look at # of job changes (assuming no return after job-loss)
• Reducing hours is hard in career jobs
• Many people experience more than one job change
Full retirement
Gradual retirement
Unretirement
Always full time work
Full-time to part-time work
Retirement after
unemployment
Retirement after disability
Average
N=2,564
0
82.8
37.4
0.0
54.8
37.8
Number of job changes
1
2+
missing
11.0
5.2
1.1
41.4
20.1
1.1
58.2
35.9
5.9
20.1
14.5
10.6
22.1
31.0
9.1
Total
100.0
100.0
100.0
100.0
100.0
50.9
88.1
52.4
23.6
9.5
26.0
100.0
100.0
100.0
25.5
1.8
17.4
0.0
0.7
4.2