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Pathways to retirement through self-employment

Published online by Cambridge University Press:  24 April 2020

Shanthi Ramnath ,
John B. Shoven  and
Sita Nataraj Slavov
Shanthi Ramnath
Affiliation:
U.S. Department of the Treasury, Washington, DC, USA
John B. Shoven
Affiliation:
Stanford University, Stanford, CA, USA NBER, MA, USA
Sita Nataraj Slavov*
Affiliation:
NBER, MA, USA George Mason University, VA, USA
*
*Corresponding author. Email: [email protected]
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Abstract

We examine the role of self-employment in retirement transitions using a panel of administrative tax data. We find that the hazard of self-employment increases at popular retirement ages associated with Social Security eligibility, particularly for those with greater retirement wealth. Late-career transitions to self-employment are associated with a larger drop in income than similar mid-career transitions. Data from the Health and Retirement Study suggest that hours worked also fall upon switching to self-employment. These results suggest that self-employment at older ages may serve as a ‘bridge job,’ allowing workers to gradually reduce hours and earnings along the pathway to retirement.

Keywords

Retirementself-employmentsocial security

JEL classification

J29: Other H55: Social Security and Public Pensions J26: Retirement • Retirement Policies
Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Issue 2 , April 2021 , pp. 232 - 251
Creative Commons
To the extent this is a work of the US Government, it is not subject to copyright protection within the United States.
Copyright
Copyright © US Department of the Treasury and The Author(s), 2020. Published by Cambridge University Press

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