In an online experiment with more than 3,000 participants, we measure time preference consistency and study actual and planned retirement timing decisions. Theory predicts that hyperbolic time preferences can lead to dynamically inconsistent retirement timing. We find that time inconsistent participants retire on average up to 2.2 years earlier than time consistent participants. Participants, who are not yet retired, decrease their planned retirement age as they grow older. This negative effect of age is about twice as strong for time inconsistent participants. The temptation of early retirement seems to rise as participants approach retirement. As a consequence, time inconsistent participants have a higher probability of regretting their retirement decision. In addition, they do not compensate for the loss of social security benefits by buying private pension insurance. Using data from a representative household survey (German SAVE panel), we find similar results.
JEL codes: D14, D15, D91, H55, J18, J22, J26.
Keywords: Retirement Timing, Time Preferences, Hyperbolic Discounting, Social Security.