Question

Which of these best illustrates the behavioral bias theory of excessive retirement at 62 years of age?

a. Michael does not see a financial benefit of waiting to retire, so he retires when he turns 62.
b. Denise was offered an early retirement package through her employer, so she retired at 62.
c. Bess is unable to retire at age 60 because she has too many expenses.
d. Marg decided to retire early because she fell at work and suffered an injury.

Answer 1

The best illustration of the behavioral bias theory of excessive retirement at 62 is Michael's decision to retire as soon as he turns 62, despite not seeing a financial benefit in waiting for higher returns, reflecting the tendency for immediate gratification. the correct option is a. Michael does not see a financial benefit of waiting to retire, so he retires when he turns 62.

Step-by-step explanation:

The option that best illustrates the behavioral bias theory of excessive retirement at 62 years of age is Michael's scenario. According to this theory, individuals are inclined to retire at the earliest opportunity, like when they first become eligible for Social Security benefits at age 62, rather than when it may be most financially advantageous to do so.

Michael's decision not to wait for a higher retirement benefit reflects the common bias toward immediate satisfaction over long-term benefits, which can be influenced by behavioral economics factors such as poor savings habits or the illusion of retirement readiness. Moreover, during the recession, older individuals faced financial setbacks, which may prompt earlier retirement decisions despite the loss of potential benefits from waiting.