Recent trends toward earlier retirement have exacerbated the financial problems facing the Social Security system and many other public and private pension plans. The massive commitment of public and private funds to Social Security and pension funds is partly responsible for the trend to early retirement. This, in fact, was one of the early goals of Social Security: to induce older workers out of the weak labor markets of the 1930's. Now, however, the age distribution has changed and the population of retirees has risen. There are three general approaches to bolstering the Social Security System: (1) an increase in employee contributions; (2) a decrease in the schedule of benefits, or delay of eligibility; and (3) an alteration in public policy to induce later retirement. The benefit structure of Social Security and pension plans often provides strong financial incentives to retire precisely at the mandatory age: the carrot and stick are frequently applied simultaneously. To observe actual labor force transition behavior, adults employed in 1973 who did not face mandatory retirement by 1975 were studied. Results showed that health, full-time earnings, and whether or not retirement income would be lost by working, were significant variables. Research suggests that the extension of the mandatory retirement age will not greatly affect work effort of older persons. A public policy that hopes to alter individual retirement decisions should focus on the financial incentives at the heart of retirement plans. (JAC)