Work as a Response to Low and Decreasing Real Income During Retirement

Abstract

The problem of preserving the purchasing power of retirement income has been a subject of public concern and policy debate. This study examines whether elderly men and women, in reasonably good health, consider work as an option when the real value of their nonwage income is decreasing. It finds that work is a very likely response to a low level of nonwage income at the beginning of retirement; and, for men, work is also a response to the decreasing real value of income during retirement. The indexing of social security benefits and their progressive structure have provided some protection against decreasing real income during retirement and have, therefore, reduced, though not eliminated, the pressure to work during retirement.