"My main interest always was in trying to understand how people's well-being can be improved."

Deciding whether to retire early to care for a sick family member can be a complex choice. Can the family get by without the employment income? Will ending a career early be emotionally draining? Amongst all the factors to consider, Americans also have to think about their own health insurance. According to the research of Assistant Professor of Economics Paula Kazi, that last factor can make a significant difference.

Kazi has found that older Americans with a sick family member are more likely to retire before the age of 65 — when Medicare kicks in — if they have retiree health insurance benefits from their employer. Those without post-retirement health insurance are more likely to continue working until age 65 rather than leave work to take care of an ailing relative.

In addition to examining factors that affect when people retire, Kazi also has looked into how well people forecast their own retirement behavior. She has found that, in general, people are good at predicting when they will retire, but not so good at predicting whether they will sell their house. It turns out that many more people say they expect to sell than actually do.

"Maybe it's because it's not easy to sell, or physically it's demanding to make the move or to move from a place they have known to a place they don't know that well," she says. The disconnect could leave people short of money if they had planned to use their housing equity to fund their retirement years.

Understanding the choices people make should inform efforts to provide better options. "The ultimate goal is to guide policy," Kazi says.

Affordable health insurance might enable people to retire early to care for sick family members without worrying about their own health security.  Knowing how interested people might be in using the financial equity in their homes without having to move — perhaps by reverse mortgages or home equity loans — could encourage the development of financial instruments designed for just that purpose.

Kazi's interests extend to questions of how age affects self and spousal responses to involuntary unemployment, and how parents' health affects children's nutritional and educational outcomes, particularly in developing nations where malaria and HIV are prevalent. In all cases, the questions of economics that fascinate her are the ones she can personally relate to and that make a difference in people's lives.

"My main interest always was in trying to understand how people's well-being can be improved," she says.

Posted Sept. 22, 2009

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