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What Triggers Early Retirement? Results from Swiss Pension Funds

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  • Bütler, Monika
  • Huguenin, Olivia
  • Teppa, Federica

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4394.

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Date of creation: May 2004
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Handle: RePEc:cpr:ceprdp:4394

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Keywords: duration models; occupational pension; retirement decision;

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References

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Citations

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Cited by:
  1. Marjan, MAES, 2008. "Financial and redistributive impact of reforming the old-age pension system in Belgium," Discussion Papers (ECON - Département des Sciences Economiques) 2008040, Université catholique de Louvain, Département des Sciences Economiques.
  2. Bütler, Monika & Staubli, Stefan & Zito, Maria Grazia, 2008. "The Role of the Annuity's Value on the Decision (Not) to Annuitize: Evidence from a Large Policy Change," CEPR Discussion Papers 6930, C.E.P.R. Discussion Papers.
  3. Estelle James & Alejandra Cox Edwards, 2005. "Do Individual Accounts Postpone Retirement: Evidence from Chile," Working Papers wp098, University of Michigan, Michigan Retirement Research Center.
  4. Monika Riedel & Helmut Hofer, 2013. "Determinants of the Transition from Work into Retirement," NRN working papers 2013-10, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  5. David Dorn & Alfonso Sousa-Poza, 2010. "'Voluntary' and 'involuntary' early retirement: an international analysis," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 427-438.
  6. Daniel Hallberg & Matias Eklöf, 2010. "Do buy-outs of older workers matter?: Estimating retirement behavior with special early retirement offers," International Journal of Manpower, Emerald Group Publishing, vol. 31(3), pages 337-359, July.
  7. Justina A.V. Fischer & Alfonso Sousa-Poza, 2006. "The Institutional Determinants of Early Retirement in Europe," University of St. Gallen Department of Economics working paper series 2006 2006-08, Department of Economics, University of St. Gallen.
  8. Piekkola, Hannu & Deschryvere, Matthias, 2004. "Retirement Decisions and Option Values: Their Application Regarding Finland," Discussion Papers 951, The Research Institute of the Finnish Economy.
  9. Christian Keuschnigg & Mirela Keuschnigg & Christian Jaag, 2009. "Aging and the Financing of Social Security in Switzerland," University of St. Gallen Department of Economics working paper series 2009 2009-26, Department of Economics, University of St. Gallen.

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