Working Paper: CEPR ID: DP4394
Authors: Monika Butler; Olivia Huguenin; Federica Teppa
Abstract: Early retirement is predominantly considered as the result of incentives set by social security and the tax system. But people seem to retire early even in the absence of such distortions, as the Swiss example demonstrates. We look for determinants of early retirement, in particular the role of lifetime income and family status, using individual data from a selection of Swiss pension funds. Our findings suggest that affordability is a key determinant in retirement decisions: more affluent men and ? to a much smaller extent ? women tend to leave the work force earlier. The fact that early retirement has become much more prevalent in the last 15 years is another indicator for the importance of affordability as Switzerland?s funded pension system has matured over that period leading to higher effective replacement rates. We also find sizeable differences in retirement behaviour across marital status. These may be explained by a constrained rational choice based on differential mortality and the desire of couples to coordinate their entry into retirement.
Keywords: Duration Models; Occupational Pension; Retirement Decision
JEL Codes: D91; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| affordability (R31) | early retirement decisions (J26) |
| wealthier men (G59) | early retirement decisions (J26) |
| higher effective replacement rates (H55) | early retirement decisions (J26) |
| marital status (J12) | retirement decisions (J26) |
| married men (J12) | later retirement (J26) |
| family ties and financial responsibilities (D14) | retirement timing (J26) |
| tendency to retire early (J26) | increased over the past 15 years (I24) |
| affordability (R31) | increased tendency to retire early (J26) |
| preference for leisure in old age (J26) | retirement decisions (J26) |
| financial ability to retire (D14) | retirement decisions (J26) |