Most young Americans plan on retiring in their early 60s, based on one survey. But they will keep working until they’re 65 or older if they’re like their parents and grandparents.

That’s in part because of the need to keep employer-provided insurance, according to a paper in the February issue of the American Economics Journal: Economic Policy.

Author Gal Wettstein found that workers without life-time prescription drug benefits sharply decreased their hours once the government started providing coverage to retirees in 2006.

In 2006, Medicare Part D was introduced to give every American over the age of 65 access to subsidized prescription drug insurance. Before then, most workers had to rely on their employers for coverage, creating an incentive to stay in the labor force.

To estimate the impact of this new policy, Wettstein used a triple-differences design that compared individuals with retiree health insurance up to age 65 to those with insurance for life, before and after age 65, before and after 2006.

Figure 4 from his paper shows how Part D led to a sharp drop in people over 65 working full time.

Figure 4 from Wettstein (2020)