The Long Reach of Education: Early Retirement

Steven F. Venti, David A. Wise

NBER Retirement Research Center Paper No. NB 14-11
Issued in September 2014

The goal of this paper is to draw attention to the long lasting effect of education on economic outcomes. We use the relationship between education and two routes to early retirement—the Social Security Disability Insurance (DI) and the early claiming of Social Security retirement benefits—to illustrate the long-lasting influence of education. We find that the median DI participation rate over a two-year interval for men with less than a high school degree is 6.6 times greater than the participation rate for men with a college degree or more. The difference for women is 6.5 times greater. Men with a college degree or more are over 25 percentage points less likely to claim Social Security benefits early than men with less than a high school degree. The difference for women is almost 27 percentage points. For both routes to retirement we focus on four critical “pathways” through which education may indirectly influence DI and early retirement decisions—health, employment, earnings, and the accumulation of assets. We also consider the direct effect of education that does not operate through these pathways. The direct effect of education is much greater for early claiming of Social Security benefits than for DI participation. For women the direct effect of education on DI participation is not statistically significant, suggesting that the total effect may be through the four pathways.

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