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Pension reductions: can welfare be preserved by delaying retirement?

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  • LACHANCE, MARIE-EVE

Abstract

Economic and demographic pressures may lead Social Security systems and employers to reduce their pensions in the future. Can delaying retirement help preserve welfare in that context? We examine this question with a life-cycle framework which includes the utility from leisure. One unique feature of our model is that it lets the retirement date be endogenously determined, unless an external constraint or shock applies first. By solving this model we find that, in reasonable scenarios, working longer does little to mitigate the negative impact of pension reductions on welfare. Building on our model, we suggest strategies to enhance the effectiveness of policies designed to induce and enable longer working lives.

Suggested Citation

  • Lachance, Marie-Eve, 2008. "Pension reductions: can welfare be preserved by delaying retirement?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 7(2), pages 157-177, July.
    • Handle: RePEc:cup:jpenef:v:7:y:2008:i:02:p:157-177_00
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    Cited by:

    1. Cipriani, Giam Pietro & Pascucci, Francesco, 2020. "Pension policies in a model with endogenous fertility," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(1), pages 109-125, January.
    2. Yusuke Miyake & Masaya Yasuoka, 2018. "Subsidy Policy and Elderly Labor," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(2), pages 331-347, July.
    3. Minoru Watanabe & Masaya Yasuoka, 2021. "Elderly Labour and Unemployment," Journal of Interdisciplinary Economics, , vol. 33(2), pages 200-214, July.
    4. Zhen Hu & James Yang, 2021. "Does Delayed Retirement Crowd Out Workforce Welfare? Evidence in China," SAGE Open, , vol. 11(4), pages 21582440211, November.
    5. Zheng Shen & James Yang, 2021. "A Simulation Study of the Effect of Delayed Retirement on Welfare of the Elderly: Evidence from China," SAGE Open, , vol. 11(2), pages 21582440211, June.
    6. MacDonald, Bonnie-Jeanne & Cairns, Andrew J.G., 2011. "Three retirement decision models for defined contribution pension plan members: A simulation study," Insurance: Mathematics and Economics, Elsevier, vol. 48(1), pages 1-18, January.
    7. Patricia Peinado & Felipe Serrano, 2011. "A Dynamic Analysis of the Effect of Social Security Reform on Spanish Widow Pensioners," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 759-771, December.
    8. Huan Wang & Jianyuan Huang & Qi Yang, 2019. "Assessing the Financial Sustainability of the Pension Plan in China: The Role of Fertility Policy Adjustment and Retirement Delay," Sustainability, MDPI, vol. 11(3), pages 1-20, February.

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