The Center for Retirement Research at Boston College (CRR) posts this study: “How Has the Shift to 401(k)s Affected the Retirement Age?” The study, authored by Alicia Munnell, Kevin Cahill, and Natalia Jivan, all of the CRR, explores how work incentives differ by type of pension plan. The authors find that a typical worker with a 401(k) plan would be expected to retire fifteen months later than a worker with traditional pension coverage. A press release summarizes why this is so:
401(k)s may lead to later retirement for three reasons. First, 401(k)s do not have the explicit early retirement incentives that are typically embedded in traditional plans. Traditional plans often pay more in lifetime benefits to individuals who retire at age 55 or 60 than to those who retire at 65, a provision originally developed to encourage workers to retire as their productivity declines. Second, benefits in 401(k) plans are typically paid out as a lump sum rather than as a lifelong stream of monthly payments. Individuals may behave differently when receiving lump sums, tending to spend more slowly to avoid running out of money. If so, they may prefer to compensate by working longer to build up a larger lump sum. Finally, individuals may consider 401(k) benefits less reliable than traditional pension benefits due to investment risk. This source of uncertainty may make workers more cautious about leaving the labor force.