Retirement Benefits and the Heterogeneous Impacts of Health Shocks on Older Workers

• In Event: Financial Security and Well-being in Retirement

Abstract

Older workers face growing economic vulnerability as rapid technological change, labor market restructuring, and health deterioration threaten both their employment and financial stability. Health shocks, in particular, pose a dual challenge: they can immediately reduce earnings through lost work capacity while simultaneously imposing large, unpredictable medical expenses. While the existing literature highlights the adverse impact of health shocks, there is a lack of research examining the role that employer-provided retirement benefits play in shaping post-shock outcomes. Using longitudinal data from the Health and Retirement Study between 1992-2018, we investigate the influence of retirement plan characteristics on the well-being of older workers who experience an acute, non-fatal health shock. Focusing on the period of time before workers become eligible for Medicare (ages 50-64), we first use a matched sample of workers who do and do not experience a health shock to estimate the impacts of the shock. Consistent with prior work, we find that a health shock at older ages leads to reduced earnings, increased medical expenses, higher rates of partial and complete retirement, worsening mental health, and a higher likelihood of difficulty with the activities of daily living. Next, we investigate how these impacts vary by retirement plan characteristics. Specifically, we use reweighting techniques and an event study design to study how the effects of a health shock vary by pension type. Our results inform both employers and policymakers seeking to strengthen retirement security and reduce reliance on public programs at a time when demographic pressures on the social safety net are intensifying.

Authors

• Grace Beata Brang, New York University
  Presenting Author

• Sewin Chan, New York University
  Non-Presenting Co-Author

• Travis St.Clair, New York University
  Non-Presenting Co-Author