Lack of Health Care Weighs Heavily on Decision to Retire

May 7, 2008 ( - Older workers without other health care insurance options are more likely to defer retirement to stay covered under their employer's plan, Watson Wyatt Worldwide found in a data analysis.

According to a press release on the analysis conclusions, employees who rely on their employers for health care coverage and do not expect to receive employer-provided health benefits in retirement are 16.5 percentage points less likely to retire in any given year than workers with access to health care coverage through another source. Other health insurance sources that allow an employee to decide to retire, according to the data, include a spouse’s health insurance plan, public health insurance, COBRA coverage, or employer-sponsored retiree health insurance.

The analysis of workers over age 50 also indicated that having only a defined benefit plan, such as a traditional pension, increases the likelihood of retirement by 4.1%. In addition, while workers’ household financial wealth has an effect on their retirement decisions, Watson Wyatt found the source of the wealth makes some difference – a $100,000 increase in expected income from a pension plan or Social Security is more likely to prompt earlier retirement than an increase in housing equity or other household financial assets.

The gradual increase of the Social Security full benefit age is also having a considerable effect on retirement decisions, according to the analysis. With the age incrementally increasing from 65 to 67, workers born in the 1940s are less likely to retire early than those born in the 1930s, the release said.

Watson Wyatt analyzed data collected from 1992 to 2004 as part of the University of Michigan’s Health and Retirement Study, a biannual survey of 22,000 older U.S. workers.

The technical paper on workers’ retirement behavior can be downloaded at . Registration is required.