Association for Public Policy Analysis & Management

For many people, working after beginning retirement benefit collection is a way to enhance financial security by increasing income. Existing research has shown that retirees are sensitive to the Social Security earnings test, which restricts the amount of earnings some beneficiaries can receive (e.g., Friedberg 1998, Friedberg 2000, Gelber et al. 2013, Gelber et al. 2017). However, little is known about the effects of other types of policies on post-retirement employment. Instead of restricting earnings, many public pension plans restrict the number of hours beneficiaries can work. Limiting hours, rather than earnings, may increase the labor supply of high-earning retirees and decrease the labor supply of low-earnings retirees.

In this project, I use return-to-work rules limiting the number of hours of employment for members of the Illinois Teacher Retirement System. I examine administrative data on employment and retirement to determine the rules’ effects on retirement decisions and post-retirement labor supply. Determining retirees’ responses to these restrictions on hours of employment is important for understanding retirement decisions and retirement income security.