Point of No Return: How Does the Duration of a Jobless Spell Affect Retirement Timing?

Published: 2013


This project uses the Survey of Income and Program Participation to examine the decision to retire after job separation among the increasing number of older individuals who lose a job between 55 and 70, and how this decision varies by labor market conditions and the resources available to the unemployed. Among jobless spells that end in retirement, most do so within a year after separation. The availability of resources like Social Security retirement benefits, high net worth, and defined benefit pensions appear to encourage more rapid labor force exit and retirement, rather than supporting job seekers during a long search. Surprisingly, retirement is only modestly more likely when the unemployment rate is high, and a greater duration of unemployment insurance benefits has little effect on retirement timing. Poor health and work-limiting disabilities are also associated with more rapid labor force exit and retirement. These results suggest little tolerance for long job searches – regardless of labor market prospects – and that those who can afford to retire will do so rather quickly.

Key Findings