The Effect of Expected Longevity on Retirement and Social Security Claiming

Zhendong Zhao, Graduate Center, City University of New York (CUNY)

This paper aims to estimate the effect of expected longevity on older workers’ retirement decisions. Instead of using subjective survival rate as a proxy of life expectancy (Hurd et al. 2004), I predict the expected longevity from age 50 by a Gompertz proportional hazard model with a rich set of health and social economic variables. The survival model incorporates the nature of the aging process and reflects the deteriorating health stock at older ages. By inserting the predicted longevity as one of the independent variables in equations for the joint decisions to retire and claim Social Security benefits, I find that, for men, 10 years longer in expected longevity would reduce the probability of retirement by 5.36% in the next two years.