Burnout and the Retirement Decision

We introduce the process of psychological burnout and recovery as an explanation for the phenomenon known as unretirement. We illustrate theoretically how predictable time variation in burnout could generate retirement and subsequent re-entry in a standard retirement model. We apply this model to the longitudinal Health and Retirement Study, presenting a novel measure of burnout, the Burnout EX3 Index. The index is correlated with different types of work stressors, and its time profile discriminates among different types of retirees. For example, prior to retirement, burnout rises steeply for future unretirees then falls rapidly after retirement; whereas burnout among future partial retirees is low and changes little over time. Using a series of econometric models derived from our theoretical model, we show that as burnout rises, retirement becomes more probable, and as burnout recedes following retirement, re-entry becomes more probable. While access to public and private pension benefits increases the likelihood of retirement for all retirees, pension accruals are least important for those who will later unretire, suggesting that unretirees are more willing to trade future gains in pension wealth for leisure than other retirees. Indeed, for this group, the effect of burnout dominates that of the net return to work. Authors’ Acknowledgements JEL classification: J14, J2 Email: [email protected]. We thank Moshe Buchinsky, Alan Gustman, and Pierre-Carl Michaud. We thank Yuyan (Sabrina) Shi for excellent research assistance. We gratefully acknowledge financial support from the Michigan Retirement Research Consortium under grant UM07-03 and the National Institute on Aging under grant 1 P01 AG02248101A1. The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA or any agency of the Federal Government.