A study from the University of Illinois shows that workers who get an unexpected or larger-than-expected inheritance are more likely to retire early. Imagine that. Jeffrey R. Brown and Scott Weisbenner, two finance professors at the university who led the study, say it “shows that unexpected inheritances hasten retirement, lending new credence to widely held economic theory that people value leisure time and will parlay newfound wealth into less work.” While this isn’t exactly earth-shattering news, there are some hard numbers attached. According to the study, “an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period.” And, as the size of the inheritance grows, so does the likelihood of an early retirement; 8 percent for every $100,000.
Brown sees a broad range of implications for workers favoring leisure over, well, working, including what could happen as boomers age and pass their assets on to their heirs.
“One of the effects it could have is driving people to retire earlier, which has implications ranging from tax revenue to the solvency of Social Security,” he said. “Retirement is an important economic phenomenon because as people exit the work force they go from being producers and savers to drawing down both their own assets and the government’s resources.”