NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Disability Insurance Incentives and the Retirement Decision: Evidence from the U.S.

Courtney Coile

NBER Working Paper No. 20916
Issued in January 2015
NBER Program(s):   AG

A rising share of older workers in the U.S. make use of the Disability Insurance (DI) program in their transition to retirement, with about one in seven men and one in nine women ages 60 to 64 now enrolled in the program. This study explores how financial incentives from Social Security and DI affect retirement decisions, using an option value approach. We find that financial incentives have a significant effect on retirement, particularly for those in poor health or with low education, who may be more actively considering retirement at younger ages. Simulations suggest that increasing the stringency of the screening process for DI would increase the expected working life of DI applicants.

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This paper was revised on February 27, 2015

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Document Object Identifier (DOI): 10.3386/w20916

Published: Disability Insurance Incentives and the Retirement Decision: Evidence from the United States, Courtney Coile. in Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, Wise. 2016

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