We study retirement timing decisions in a defined benefit (DB) pension plan with a service-purchase
option. An employee who would otherwise retire at a fixed time T may elect to purchase L additional
years of service and retire early. Earlier retirement provides additional leisure but requires an upfront
payment and typically results in a reduced post-retirement income stream. We model this trade-off in
a continuous-time retirement framework by allowing the employee to choose L to maximize the value
of wealth and leisure at retirement in both deterministic and life-contingent settings. Our model
captures a common feature of public pension systems: early retirement is often accompanied by both
an upfront cost and a permanent reduction in benefits. We show that this structure yields tractable
and intuitive results in several benchmark cases, including settings without mortality risk and settings
with mortality risk under simplifying assumptions. In more general cases, we characterize optimal
behavior through comparative statics and numerical examples. A key insight is that the interaction
between the finite-horizon value of leisure and the lifetime cost embedded in pension pricing can
generate a range of behaviors, including monotone strategies and interior optima. While many results
align with economic intuition, others require more careful interpretation. We also extend the model to
allow for dynamic decision-making via a multi-period service-purchase option, solved by backward
induction. The results provide insight into optimal retirement timing and the role of plan design in
shaping participant behavior. This is joint work with David Kausch and Virginia Young.