An empirical analysis of the factors impacting discount rates: Evidence from the U.S. Marine Corps

This analysis examines the impact of age, race, marital status, number of dependents, education, rank, years of service, and occupational code on personal discount rates. The study focuses on 3241 Marine Corps officers/enlisted personnel between 1992 and 1997 who separated from the Marine Corps through the VSI program (an annuity payment) or the SSB program (lump-sum payment). The analysis finds that, although the degree of statistical significance varied between the officer model and the enlisted model, holding other factors constant, females and individuals with more years of service or education were less likely to take the lump-sum payment, and that blacks and individuals with more dependents were more likely to take the lump-sum payment. Across all demographic factors, enlisted personnel had statistically significantly higher average discount rates than officers, as is consistent with prior studies. The estimated personal discount rates averaged 14.9% for officers and 24% for enlisted Marines. This study contributes to the literature in that it is the only study to examine the Marines during this time period. Many of the results can be generalized to the civilian sector to assist in formulation of savings/retirement policies.