Behavioral Economics and a Disincentive to Retire

We have talked a fair amount on this blog about “choice architecture” and how the new structure of the retirement system, with its move from pensions to 401(k) plans, may be affecting behavior in unintended ways, such as by encouraging litigation. At his blog, the RiskProf has an excellent post on another negative behavioral change that the transition to defined contribution plans, such as 401(k)s, may be inadvertently creating: namely, a disincentive for older workers to retire, driven by the uncertainty in these types of retirement plans as to whether the worker actually can fund a decades long retirement. In the RiskProf’s personal case, involving the graying of university faculties, he presents the argument in his post that combining this dynamic with tenure is likely to lead to an aging university faculty population hanging on well past its prime. I suspect I made enough faculty members angry with my post on the increasing irrelevance of law review articles, so I won’t stick my two cents in on this issue and will instead let the RiskProf’s post speak for itself.