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Early Retirement, Social Security and Well-Being in Germany

In: Developments in the Economics of Aging

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  • Axel Börsch-Supan
  • Hendrik Jürges

Abstract

Germans retire early. On the one hand, early retirement is very costly and amplifies the burden which the German public pension system has to carry due to population aging. On the other hand, however, early retirement is also seen as a much appreciated social achievement which increases the well-being especially of those workers who suffer from work-related health problems. This paper investigates the relation between early retirement and well-being using the GSOEP panel data. The general picture that emerges from our analysis is that early retirement as such seems to be related to subjective well-being, in fact more so than normal retirement. Early retirement most probably is a reaction to a health shock. Individuals are less happy in the year of early retirement than in the years before and after retirement. After retirement, individuals attain their pre-retirement satisfaction levels after a relatively short while. Hence, the early retirement effect on well-being appears to be negative and short-lived rather than positive and long. Whether this is an effect of retirement itself or a psychological adaptation to an underlying shock cannot be identified in our data and remains an open research issue waiting for a more objective measurement of health.
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  • Axel Börsch-Supan & Hendrik Jürges, 2009. "Early Retirement, Social Security and Well-Being in Germany," NBER Chapters, in: Developments in the Economics of Aging, pages 173-199, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:11316
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    References listed on IDEAS

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    1. Barbara Berkel & Axel Börsch-Supan, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 393-421, September.
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    Cited by:

    1. Elizabeth Horner, 2014. "Subjective Well-Being and Retirement: Analysis and Policy Recommendations," Journal of Happiness Studies, Springer, vol. 15(1), pages 125-144, February.
    2. Andrew E. Clark & Yarine Fawaz, 2015. "Retirement and the Marginal Utility of Income," PSE Working Papers halshs-01189009, HAL.
    3. Merz, Joachim, 2018. "Are Retirees More Satisfied? Anticipation and Adaptation Effects of Retirement on Subjective Well-Being: A Panel Analysis for Germany," IZA Discussion Papers 11832, Institute of Labor Economics (IZA).
    4. Joachim Merz, 2018. "Are Retirees More Satisfied? – Anticipation and Adaptation Effects of Retirement on Subjective Well-Being: A Panel Analysis for Germany," SOEPpapers on Multidisciplinary Panel Data Research 986, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Korthals, R.A., 2012. "Selection and tracking in secondary education: a cross country analysis of student performance and educational opportunities," ROA Research Memorandum 014, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    6. Joachim Merz, 2015. "Sind Rentner zufriedener? Eine Panelanalyse von Antizipations- und Adaptionseffekten," FFB-Discussionpaper 99, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
    7. Montizaan, Raymond M. & Vendrik, Maarten C.M., 2014. "Misery Loves Company: Exogenous shocks in retirement expectations and social comparison effects on subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 1-26.
    8. Zsuzsa Kapitany, 2009. "Non-employment, Ill-being and Subjective Well-being," CERS-IE WORKING PAPERS 0922, Institute of Economics, Centre for Economic and Regional Studies.
    9. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.

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